SMEs vs. the Carbon Tax

This story appeared here in the July issue of Business Review Australia magazine.

Written by Allie Schratz, Editor of Business Review Australia

Despite Opposition Leader Tony Abbott’s best efforts over the past year, the carbon tax has officially been implemented in Australia. As of 1 July, the top 500 companies who emit more than 25,000 tonnes of carbon annually are to be taxed $23 per tonne, with a portion of the funds going back into green programs and household usage compensation.

In order to counteract the carbon-offsetting fees now burdening their accountants, these top-polluting businesses will likely look to increase the cost of the goods and services they provide: namely, energy and power. Millions of households will receive compensation to help cover their increased energy bills, but how will this impact Australia’s small (5-19 employees) and medium (20-200 employees) size enterprises (SMEs) who will not benefit from the compensation plan?

Awareness Among SMEs

According to the MYOB Business Monitor survey conducted back in February, nearly half of the 1,043 total SMEs questioned said they were still in the dark about the effects this new legislation would have on their business.

MYOB CEO Tim Reed was floored by the survey’s results when they were revealed in late May, just over one month before the tax was due to take action.

“This is a major piece of legislation that will have a lasting effect on all business owners. It is deeply concerning that our research has found such a low level of awareness about the carbon tax impact on business amongst SMEs, the engine room of our economy,” said Mr Reed in a statement accompanying the survey results.

Business Impact

For many SMEs who have done their homework and weighted the additional costs, the outlook isn’t particularly positive.

“The effect [of the carbon tax] is even greater, as this tax hits small businesses at the core,” said Julie Sweet, who has run her Sydney-based web business Certificatesonline for the past eight years with just a handful of employees. “The price of electricity rising is one thing as a result of carbon tax, yet staff and taxes associated with employees is another; all more and more obstacles placed in the path of small business owners, disabling us.”

For other companies, there are not many more steps available to become a more energy efficient business.

“Our operation is quite reliant on sub-contract services so our wages are as low as possible. Apart from turning the lights in our showroom off during the day, there is very little we can cut in terms of recourse consumption,” said Harry Graeve, who runs Sign Here Graphix in Melbourne.

While price increases are to be expected from burdened businesses, the ACCC is paying particular attention to any shops and restaurants that up their prices and blame the carbon tax – or exaggerate its impact on business – without proper justification. "If a business claims that a price is linked to the carbon price, that claim must be truthful and have a reasonable basis,'' said ACCC deputy chairman Dr Michael Schaper to the Herald Sun in May.

Carbon Influences Businesses

On a positive note, one of the main aims of the carbon tax is to get people thinking differently about their energy consumption and direct their efforts towards more efficient practices where possible.

“We’re seeing more consciousness on all levels of organisations of the need to address energy spending and investment in efficiency as a way to curb energy spending,” said Edward Hanna, Executive Director of Sustainability and Business Development at Energy Action. “Understanding your position and knowing your carbon footprint will benefit your business in the long run.”

To make this an easy process, Energy Action became the first organisation to develop the carbon tax calculatoras a tool for businesses to measure the impact of the tax on their gas and electricity usage.

MYOB’s Tim Reed maintains that, in the end, preparation is the key to adjusting to the tax: “For those who research well, health-check their business fundamentals and capitalise on the opportunities, the carbon tax can be a positive experience,” he said.

“The tax should motivate businesses of all sizes to plan ahead, understand the impact on their customers, analyse their cost base and profit margins, and do what they can to take advantage of opportunities.”