“Leave the cash in their hands”: Poolwerx founder calls on Morrison to fast-track SME tax cuts

The Morrison government should use its October budget to fast-track planned tax cuts for small and medium businesses to help them survive a forthcoming recession, Poolwerx founder John O’Brien says.

As the COVID-19 pandemic rages on, attention is turning to how Prime Minister Scott Morrison and Treasurer Josh Frydenberg will pull fiscal levers with the federal budget later this year.

O’Brien, former chair of the World Franchise Council and a current member of the federal government’s Franchise Advisory Council, has thrown his two cents in the ring, calling on the Coalition to implement tax reform that supports small businesses.

“All small businesses need is for governments to get out of their pockets and get out of their way,” O’Brien tells SmartCompany.

“Businesses know how to manage their money better than governments; leave the cash in their hands.”

Finance Minister Mathias Cormann has already signalled an intention to prioritise tax cuts and business deregulation in the October budget, and a report in the AFR on Thursday morning suggests cabinet is considering everything from further corporate tax cuts to broader industrial relations reform ‘on the scale of Hawke/Keating measures’ in the 80s and 90s.

The franchising boss wants the Coalition to bring forward already legislated SME tax cuts — set to reduce the headline rate for firms with less than $50 million in annual turnover from $27.5% to 25% by 2022-23 — to the current financial year.

The 2021-22 SME tax cut was forecast to cost the government $2 billion in 2018, but that amount is likely to have changed considerably due to reductions in taxable income as a result of the coronavirus crisis.

O’Brien has also called for the government to emulate countries such as New Zealand and increase the goods and services tax (GST) to at least 15% or as high as 20%.

While Australia’s current GST rate is 10%, O’Brien says a higher rate would bring Australia in line with other countries and help raise revenue to pay for coronavirus stimulus measures.

“Most of the world accepts it’s far better to have a consumption tax than a revenue tax, it’s the fairest tax of all — the more you consume the more you pay,” O’Brien says.

The average GST/value-added tax (VAT) across the OECD was just over 19% in 2019.

Poolwerx, which trades its franchised retail and service operation across Australia, New Zealand and the United States, has more than 200 stores worldwide.

Poolwerx trading steady as kids head home

O’Brien has been active in recent weeks lobbying politicians across the country to ensure businesses in the pool retail and maintenance industry were allowed to remain open during trading restrictions that have decimated other sectors.

Poolwerx and competitor firms have come together to lobby and have been on the phone to health ministers in multiple states, arguing unmaintained pools can become a health risk themselves if they’re not properly cleaned and chemically cleaned.

He says the Franchise Council of Australia should make the tax reform case to government ahead of the October budget, including suggestions to axe capital gains tax (CGT) and fringe benefits tax (FBT) to further assist SMEs struggling with trading restrictions.

FBT brought in $4.3 billion to federal government coffers in 2018-19, while CGT is rolled into the much larger income tax revenue take.

“Our industry body represents some 800,000 people … I’d hope we talk about these things,” O’Brien says.

O’Brien says franchisees have held up well despite trading restrictions and residential lockdowns savaging large swathes of Australia’s retail sector in recent weeks.

“April has definitely seen an impact as people get a bit more cautious, but interestingly for us, because we’re retail and service, we’ve had a 10% decline in retail and a 10% uplift in service,” O’Brien says.

In other words, Aussies are still enquiring about building new pools and are spending more on maintaining the ones they have.

Why?

O’Brien, who traded through the 2008-9 global financial crisis, says many university-aged children are returning home and bunkering down with their parents.

Hence the increased demand for isolation-friendly swimming.

“Most pool owners are 40-plus, so not only are the kids and mum and dad at home, but in many cases, the 20-something kids who have lost their hospitality jobs have come home too,” O’Brien says.

“The nest is filling up, in the GFC they used to call it ‘cocooning’.”