Potential spending boost for retailers

Potential spending boost for retailers

Jerry Macey on 15 May 2015

By Jerry Macey 
On 15 May 2015

This year’s Federal Budget could mean good news for the Australian retail industry.

Whether it’s small business taking advantage of the immediate tax writedowns of up to $20,000 an item or households benefitting from the $3.5 billion investment in the childcare system, retailers could be reaping the benefits.

The various savings and spending decisions that impact directly on household spending power add up to about 0.7 per cent of disposable income over the next four years.

The proposed immediate writedown of each and every asset up to $20,000 for small businesses earning less than $2 million per year is expected to see a pick-up in demand for new equipment, furnishings and technology.

This concession is intended to come into effect from Budget night so retailers could already be starting to see a pick-up in sales.

Additionally, the Budget announced the abolition of the fringe benefits tax on all portable electronic devices used for work by businesses earning less than $2 million per year. This could also drive sales growth across this sector from 1 April 2016.

On the household front, while any resulting retail stimulus from the new single Child Care Subsidy will not hit until 1 July 2017, general consumer confidence from the Budget could deliver an uptick in retail spend.

Pending pre-agreement of states to the legislation, domestic retailers’ competitiveness with foreign suppliers of digital supplies will improve as the 10 per cent GST will be applied to cross-border digital suppliers from 1 July 2017. The introduction of the GST is seen as creating a more even playing field for local retailers who have had to compete against offshore online purchases where no GST has been levied.

To put Budget night’s policy announcements in context, according to the Australian Bureau of Statistics, retail trade rose by 0.3 per cent in March for an annual growth rate of 4.3 per cent.

While the outlook had been helped by continued low petrol prices, the recent RBA interest rate cut and growth in housing prices, this budget could help improve consumer confidence which may translate to an increase in retail spend.

Find out more about the Federal Budget 2015

Things to know before you Can:
This article is intended to provide general information only and does not take into account your individual objectives, financial situation or needs. The Budget measures are, at this stage, announcements and may change before they become law. You should seek independent, professional tax advice before making any decision based on this information.