An unexpected billion-dollar increase to the cost of modernising Australia’s business registry system will heap pressure on the new Labor government, Assistant Treasurer Stephen Jones says, foreshadowing tough budget cuts in the months to come.
Speaking to reporters Tuesday, Jones claimed the former Coalition government concealed how plans to consolidate around 30 business registers into one super-system had ballooned in cost.
The scheme, touted as a simplification of the ageing, confusing, and labyrinthine business and company registries operated by ASIC was revealed in the Coalition’s 2018-19 federal budget.
The Morrison government tipped $420 million into the scheme in 2020, bringing its total expected cost up to nearly $500 million.
The new system was expected to come online under the ATO’s direction in 2023, the former Morrison government this year declared it would reduce the regulatory burden on small businesses.
But Jones said an assessment undertaken by the new government found the true cost of the registry modernisation scheme is likely around $1.5 billion — a billion dollars more than Labor anticipated.
“What’s worse, they have known about this for quite some time – at least 12 months,” Mr Jones alleged.
“They have known this project was running rapidly behind time and rapidly over budget.”
The former government “hid” the true cost of the scheme until after the May 2022 election, he added.
The project is now expected to be completed in 2024.
News of the unforeseen $1 billion add-on will now shadow Labor’s own federal budget decisions, given Australia’s inflationary environment and the lingering cost of necessary fiscal support pumped out by the Coalition earlier in the pandemic.
Much has been made of Treasurer Jim Chalmers impending economic update, due tomorrow, in which he will paint a “confronting” picture of inflation and the state of real wage growth.
In recent days, Chalmers has hammered home the need to ensure “we are getting maximum bang for buck from taxpayers’ dollars, which are costing more and more to service because every additional dollar in the budget is a borrowed dollar”.
The cost of Labor’s election promises was already set to add $7.4 billion to the deficit over the next four financial years, before the government claimed the registry project was a cool billion dollars over budget.
Still, Labor is unlikely to scrap the modernisation project, given the toll ageing legacy systems could have on businesses driving growth in the Australian economy.
Indeed, industry groups have urged the government to stay the path.
Without delving into the cost of the scheme, Alexi Boyd, CEO of the Council of Small Business Organisations of Australia, told SmartCompany the industry group “supports programs that streamline processes and reduce the regulatory red tape that small businesses encounter every day”.
Taking to Twitter on Tuesday, John Winter, CEO of the Australian Restructuring Insolvency & Turnaround Association, declared the upgrades “critical” to “hold dodgy directors to account and help stop phoenixing”.
“It will also help people make sure they know who they are doing business with, so help keep down insolvencies,” he added.
But an unexpected billion-dollar item on the government’s bottom line raises even more questions about the business measures Labor will support — including the $1.55 billion tech and digital training tax offsets for SMEs which Labor backed before the election, but is yet to legislate.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
