9th May 2006 
 
Small to medium sized enterprises (SMEs) are increasingly optimistic about their economic outlook, despite being strangled by taxation red tape, an Institute of Chartered Accountants survey has revealed.  
 
Launched today, the Institute’s 2006 national SME survey* of 802 practitioners of small to medium sized businesses, revealed that 67% of respondents expected sustained or improved economic conditions for the next 12 months, compared to just 46% in the 2005 survey. Conversely, 32% expected weaker economic conditions, down from 52% in 2005.  
 
Practitioners in Western Australia were the most optimistic, with 44% predicting stronger conditions ahead (see table 1).  
 
Despite the smiles, a staggering 95% of all respondents called for action against the litany of legislative red tape strangling SMEs. Over 750 respondents cited the number one issue in need of reform to be the complexity of current taxation legislation faced by small businesses, with an overwhelming 69% of all those surveyed strongly believing action is needed.  
 
Similarly, 91% of practitioners questioned nominated the volume and frequency of change in the Federal taxation system as an area requiring reform; and 87% expressed a level of concern for the overall Federal tax compliance costs, up on 81% in 2005.  
 
“These repeated frustrations expressed by small businesses, year after year, over Federal tax legislation sends a clear message to the government: reduce red tape”, said the Institute’s SME Chairwoman, Sue Prestney.  
 
“Our current tax legislation is not written for the 96% Australian of business that are SMEs”, Ms Prestney argues. “It is designed for the big end of town. And until this changes, tax legislation will continue to impose onerous compliance costs for small businesses”.  
 
The biggest threat to the economy was identified as wage increases, for the second year running, with 74% of respondents expressing concern (see table 2).  
 
Indeed a number of employment issues rated highly in the 2006 survey (see table 3), with 77% of those surveyed citing concern over occupational health and safety issues and 65% losing sleep over SMEs’ inability to attract staff, as well as over unfair dismissal laws.  
 
However, it was the worrying 91% of respondents that nominated an inability to retain staff, with over half rating this as a major concern, which proved the most significant employment issue and demonstrates that the skills shortage continues to bite.  
 
“The Institute’s survey highlights the impact that macro issues are having on small businesses. Practioners report SME owners are worried about not being able to attract and keep staff. They are worried about a lack of successors. And only 11% (see table 5) of those surveyed definitely believe that the Government’s Work Choice changes will have a positive impact on the employment growth of small businesses”, Ms Prestney said.  
 
The 2006 survey also revealed that the state taxes of most concern to respondents were Land Tax (75%) and Payroll Tax (75%), closely followed by Stamp Duty (72%) (see table 4).  
 
Corresponding to the evident concern shown by SMEs from the survey about the complexity of the tax system and associated compliance costs, the Institute has recently commissioned a report from Atax which focuses on improving access to various tax concessions currently available to small businesses. This report will be submitted to government with a view to providing further support for the consideration of the Taskforce on Reducing The Regulatory Burden on Business.  
 
*The Institute’s 2006 national SME survey is based on the responses of 802 Chartered Accountants working in the SME sector across Australia. Respondents were asked to rate a series of issues relating to the SME sector on a scale of: 1 (definitely no concern) to 5 (extremely concerned).