Getting Australia ready for a bigger self-employed workforce

The federal government is busy preparing its first budget and getting the nation ready for what’s in store.

This budget will be the first of many that will shape how we all work in the future, so it’s worth looking at other countries to see if there are any policies that may be repeated here. 

In the UK it is forecast that by 2016 there will be more self-employed people in the workforce than those employed by government. This represents a shift in the balance of employment that hasn’t been seen in that country since the early 1950s. It’s a move being played out all around the OECD as governments begin to manage all the moving parts within their economies in order to balance the books between income from taxpayers and expenditure on both taxpayers and non-taxpayers.

What’s most important in all of this is the shift from employment by large organisations to employment as self-employed in micro, small and medium-sized businesses. With all this in mind, no matter how much governments wish to cut fixed costs, they still need to provide services to citizens. What this means though is that they will organise the delivery of those services differently.

I’d like to take this opportunity to point out that there doesn’t seem to be much appetite amongst voters – or government – to just cut services. Voters, just like shoppers, don’t like services they’re paying for to drop. But there is huge appetite to have those government services provided by people not employed by government. If you add this to the fact that many of the day-to-day services being provided at a micro level within specific geographies in government bodies, can still be provided by individuals, often the same person who is doing that task today, whether they are working for the government or not.

So what can we learn from other countries, places that went through far more pain in the GFC than we did in Australia. Well if we are to give individuals who may be facing the prospect of leaving a full-time job, either in government or in a large commercial organisation, the chance to benefit from and embrace this change, we should perhaps look at:

• Raising the level of income a company must earn before having to complete a BAS to $120,000 a year. Why that number? Well two partners in a micro business can earn a good living providing a service based upon just their time, and a small amount of materials, at that level.
• Having either a lower “entrepreneur’s capital gains tax” of 10% as in the UK, or 0% as in NZ, payable by the owners when a small business is sold.
• Increasing the tax-free threshold on income tax to $24,000 per year for all employees in businesses with turnover less than $500,000 and fewer than five equivalent full-time employees.
• Lowering the tax rate on distributed company profits (dividends) to a maximum of 5% for all businesses with turnover less than $500,000 and fewer than five equivalent full-time employees.
• The state governments removing payroll tax… period.

Finally, and I am not sure how government can do this whilst cutting costs, they could provide a better way for people who have never run their own business to make the move from employee to self-employed or small business owner. Every bit of research around the world says that new, first time small business owners that have the chance to learn key business principles, and be coached or supported in the first three years of that new business, have a significantly higher survival rate.

It would be a crying shame if this, or any other government, undertook a policy of significant change in employment without equipping its citizens to understand, harness and embrace that change for growth: growth in their business, the number of future employees and the country’s tax base.

Let’s see how it plays out over the coming weeks.

Kevin Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings.