Australia’s small and medium-sized businesses (SMEs) need this year’s federal budget to focus on practical measures that improve cash flow, support investment and ease cost pressures across the economy.
Last year’s budget backed small business with more than $2 billion in support, including energy bill relief, payment-time measures, digital and cyber programs, and other initiatives. These measures provided important support across the sector, particularly in helping businesses manage rising costs and invest in capability.
Earlypay CEO James Beeson (pictured) said the next phase of support should be more targeted and focused on the practical needs of businesses.
“This budget cannot be another exercise in short-term relief. It needs to deal seriously with the pressures facing SMEs and set clearer conditions for investment, productivity and sustainable growth,” Beeson said.
“SMEs employ the majority of Australians in the private sector. If they are under pressure, the economy is under pressure.
“Cash flow is the lifeblood of small business, but it also plays a direct role in inflation. When businesses are squeezed, the impact doesn’t stay contained.”
While James Beeson acknowledged the Government has taken steps to support small business in a volatile environment, he said there is an opportunity in this year’s budget to go further and strengthen the foundations for growth.
“Many of these initiatives are designed to support businesses over time. In the current environment, there is also a need for more immediate, cash flow-focused measures,” Beeson said.
“The most effective way to ease pressure right now is to improve cash flow directly.”
For SMEs, the priorities are clear, and they start with cash flow
1. Improve payment times across the economy
Slow payments remain one of the most persistent and damaging pressures on SME cash flow.
The Federal Government can lead by example by ensuring all public sector entities pay suppliers as quickly as possible. It should also increase pressure on large businesses to improve payment practices across the private sector.
Earlier payments inject cash into supply chains faster, improving liquidity for SMEs and reducing reliance on external funding.
“The faster cash moves through the economy, the better it is for small business,” Beeson said.
“When government and large businesses pay earlier, it strengthens the entire supply chain. It gives SMEs the working capital they need to operate, invest and grow.”
“Small businesses are always the first to feel the squeeze when supply chains come under pressure, and that’s exactly what we’re seeing right now. Faster payment times are one of the quickest ways to ease that.”
With SMEs employing around two-thirds of Australia’s private sector workforce, improving payment times is one of the most efficient ways to support jobs, business stability and broader economic activity.
Faster payment cycles would also ease the pressure on SMEs to increase prices simply to manage cash flow constraints, helping to stabilise costs across the economy.
2. Provide practical transition support for Payday Super
The shift to Payday Super represents a significant change to how SMEs manage cash flow.
A recent study conducted by Employment Hero reported that 58 per cent of employers remain unaware of the changes, and as many as 40 per cent of businesses may need a line of credit to meet the new timing requirements. That is not a minor compliance change, it is a material cash flow event.
“This is one of the biggest underappreciated changes facing small business,” Beeson said.
“For many SMEs, this will require a real adjustment in how they manage working capital.”
Rather than delay the reform, the budget should include practical transition support, including education, implementation guidance and temporary measures to ease the impact.
Without that support, many businesses will be forced to absorb or pass on additional costs at a time when margins are already under pressure.
Providing greater flexibility around the timing of other obligations, such as ATO payment arrangements, would help offset this shift and ease short-term cash flow pressure during the transition.
3. Keep the instant asset write-off working full-time
For many SMEs, equipment purchases are not optional, they are how businesses stay productive, competitive and able to grow.
With the Government’s $20,000 Instant Asset Write-Off currently due to expire on June 30, it should be made permanent and expanded to provide greater certainty.
“Certainty drives investment,” Beeson said.
“If businesses know the settings won’t change year to year, they are far more likely to commit to spending that improves productivity.”
This would support investment in equipment, technology and other productivity-enhancing assets, helping businesses manage rising costs and reduce the need to pass those costs on to customers.
4. Incentives that help SMEs invest, not just hold on
Beyond the instant asset write-off, the budget should support SMEs to invest in the capabilities that make them more efficient, more competitive and better able to manage future disruption.
This includes incentives for technology adoption, energy efficiency upgrades and modern equipment.
“The goal shouldn’t just be to help businesses get through the next few months, it should be to help them come out stronger,” Beeson said.
More productive businesses are better placed to absorb cost increases rather than pass them on, which helps to contain inflation over time.
5. Targeted tax relief for smaller SMEs
With SMEs employing the majority of Australia’s workforce, there is a strong case for more targeted tax settings that support smaller businesses to reinvest and grow.
Expanding access to lower company tax rates or introducing more flexible tax arrangements for smaller, cash-constrained businesses would provide practical relief and improve cash flow without requiring large new spending programs.
“Targeted tax relief for smaller SMEs would free up capital where it’s needed most: inside the business,” Beeson said.
“That supports reinvestment, hiring and growth, and reduces the pressure to push costs onto customers.”
6. Rebuilding domestic capability and energy independence
Recent global disruptions have highlighted Australia’s reliance on imported goods and offshore supply chains.
The budget should include targeted incentives to support SMEs to manufacture, produce and source more domestically, particularly in critical sectors such as food production, energy and essential goods.
Supporting SMEs to invest in local production, renewable energy and efficiency would not only strengthen economic resilience, but also reduce exposure to global price shocks that ultimately flow through to Australian consumers.
“Rebuilding domestic capability is about making the economy more resilient and less exposed to external shocks,” Beeson said.
“With the right incentives, SMEs can play a leading role in strengthening Australia’s economic independence while helping to stabilise costs over time.”
A budget that will be judged on outcomes
With pressure building from both global and domestic factors, this budget will be judged on whether it delivers real improvements to SME cash flow while helping to contain inflation across the economy.
Getting these settings right will be critical to supporting business confidence, investment and sustainable growth across the SME sector.