2016 Budget Impact Survey - Findings

16 May 2016

The ACA’s 2016 Federal Budget Impact Survey aims to understand what the budget means for architectural practices and the profession, and thereby inform ACA advocacy and activity. We present the results below, and encourage members to also read John Held's analysis of this years results.

The first set of questions aimed to provide a general understanding of the expectations of the impact of the budget on individual practices, the profession and society more broadly.

Impact on practices

13 - Q1

24 people took the opportunity to comment. Half the respondents commented on tax cuts, but many expect them to have little impact, with one respondent commenting, "I’d rather see higher taxes and a more equitable society generally." The lack of funding for health and education was concerning for those practices working in the area, while others expressed concern about the lack of action on climate change and infrastructure. A sample of comments includes:

“Minimal positive impact for the practice, other than possibly assisting clients to undertake work – this may have some flow-on to the practice workload.”

“Mainly through stimulus of building through potential impact of superannuation changes.”

“$20K writeoff provides some incentive to spend, but still have to have $20K to spend! Reducing company tax: I’d rather see higher taxes and a more equitable society generally.”

“Slight tax cut will hardly be noticed, social justice element completely absent, no real funding for education and health, our main work sectors.”

“No real commitment to infrastructure or climate change initiatives.”

“Confirms low interest rates which will be positive for residential development. Extends ability to write off $20K capital expenditure to companies our size. Lower tax rate positive – fully support drop to 25%.”

“The 1% reduction in company tax will have a positive effect.”

“Modest decrease in company tax rate is positive. The reduction in limit on concessional superannuation contributions is a negative.”

“The company tax cuts are so small that they are negligible. The tax bracket changes to overcome bracket creep are also so small that they are insignificant.”

“The reduction in company tax will assist with funding ongoing investment.”

“We tax plan and can't seem to make enough profit to be an issue, so reducing company tax is irrelevant to us. The public service under threat affects us for about six months and in Canberra we're just starting to recover from the last round.”

“There is a sense that the Government has a reasonable understanding of the economy and society it is supposed to be leading, and that it is trying to create social and economic conditions that encourage individual prosperity in the service of the nation’s well being.”

“Uncertainty in relation to tertiary education sector.”

“Two of the most important sectors it affects in our electorate of Bass are hospitals and schools funding. It locks in cuts of $1.2billion over the next 10 years. It abandons the Gonski needs-based funding model and our schools miss out. Fewer doctors and nurses, fewer beds in hospitals at Georgetown Launceston and Scottsdale. It also fails to deliver on the redevelopment of the University of Tasmania in Launceston. All of the above directly effect architecture and indirectly slow the economy here so less people have work and do less construction. We desperately need more local jobs and need our children to have good opportunities to study at UTas.”

“While we don't comply for tax cuts, some staff will get tax cuts and the business environment is more positive.”

“Cutting back funds into Canberra reduces work opportunities. The minor tax relief may have a nominal benefit.”

“Infrastructure spending generally feeds down to the construction industry.”

“Reduction in company tax may be useful if the practice makes a profit. However the economy needs stimulus to assist in profit making and reduction in the tax rate does not necessarily translate that way. Growth and Jobs may yet prove to be another slogan.”

“Retention of negative gearing was the big positive for architects and their clients.”

“The changes to the definition of small business to increase it to $10,000,000 will be beneficial.”

“Limited / no spending on research and or university sector.”

 

Impact of last year's budget

2 - Q2

Only ten people made further comment, with only one commment being overtly postive. 

“Lack of overall confidence.”

“I am just a sole proprietor who's just been ‘surviving’ practising the profession since registration.”

“Reduced government spending, state agencies in state of uncertainty.”

“Business has been improving, however it is difficult to say whether this has anything to do with last year's budget. More likely other factors.” 

“It started out negative and then few of the measures were passed through senate so it was a Clayton’s budget.”

“Reduced work load in Canberra resulting laying off of 3 staff.”

“Not certain of what benefits it delivered other than a softening of the 2014 harshness.”

“Similar to above – reduced spending in research and university sector.”

“Failure to pass budget measures prolonged business uncertainty to some extent.  However the general demeanour of the Federal Government in the period following the budget began to create some level of confidence, which assisted business to display a more positive attitude in the marketplace.”

Impact on the wider profession

11 - Q3

Eighteen people provided further comment, with most being ambivalent in their comments. A range of reponses follows:

“Any cut in company tax increases positive business interaction. Also with no large sweeping changes this will create stability.” 

“Some areas of benefits, some not – overall not building confidence on core environment issues.”

“I really don't know.”

“Cuts to aged care will have a negative affect whilst increases to infrastructure will have a positive affect.”

“Generally OK – business as usual, interest rates staying low, coalition still favoured to win re-election.”

“Smaller business will benefit from company tax and potential stimulus.”

“No immediate evidence that the Budget will have significant impact on creation of new project works at the level of small business. Company tax rate reduction will be of minor benefit if your business happens to make a profit.”

“The new internship opportunities offer good possibilities for assisting practices.”

“Small practices will benefit from the modest encouragements offered for small business.”

“Still no proper expenditure on major infrastructure or investment in cities. Rhetoric yes, but no cold hard cash.”

“Like Bass, the cuts to hospitals and education are going to effect the whole architecture and construction sectors.”

“Most architecture practices will benefit from lower tax cuts and many staff will benefit from tax cuts.”

“It is benign so will have marginal positive and negative effects.”

“Assuming that the spend on jobs, growth, infrastructure, education, health and housing is wide spread. Also if the spend on defence in SA finds its way out to the broader community in terms of housing and business for the work. Did not see anything to help our northern suburbs with the loss of car manufacturing.”

“It will enable more companies to remain in practice. But without significant increase in the amount of project work available, it will mean competition remains unsustainably high, and fees unsustainably low. The profession needs construction work commensurate with the distribution of practices, not life rafts.”

“Finally someone is recognising the importance of small business.”

“If small business confidence in general increases they may be prepared to invest.”

“What we need is confidence in nation's leadership and direction. Current timid budget and thought bubble leadership style of last several years gives uncertainty / pessimism in society and our economy.”

 

Impact on Australian society

10 - Q 4

Fifteen people took the opportunity to comment further, with two hopeful about the impact of the proposed internship schemes. As in the comments last year, there is concern about the lack of action on climate change

“I really like the paid work experience incentive – this could work well. People with large superannuation balances who are affected just need to deal with it. Tax needs to come from somewhere. The streamlining of the superannuation framework looks really good.”

“Provided the measures to encourage youth employment are properly thought out they could be very advantageous all round. (‘Internship’ needs to be very carefully defined, managed and scrutinised, and youth training schemes need to have real, personal, grass roots engagement – individual on individual – not more half-baked sharks taking money for old rope and cheating vulnerable young people.) The figures show what a relatively small proportion of the population pays most of the tax (not the rich, but the solid middle band of PAYE workers). These people need encouragement, and many, many more need to be helped and encouraged to join the band of regular, lifelong taxpayers, and remain there. Many hands make light work.”

“Wins and losses. NO overall improvement for society. Higher taxes could solve lots of problems.”

“No commitment to environmentally important policy areas.”

"No significant changes – no structural tax changes.”

“Not really – looks to be safe no-risk budget without specific policy to address debt or climate.”

 “Although I am worse off because of the superannuation changes, I think that they are a good move.”

“Recovering the lost taxes to international companies working in Australia that pay next to nothing in taxation would solve both the cuts to our essential services and education sectors and would balance the deficit.”

“Why do we not have controls on foreign ownership of Australian properties? Countries like France, Japan and Indonesia all limit the percentage of ownership and the rate of land tax to both allow foreign investment but also maintain control of Australian assets and land. We have a hotel in Bass that is being designed, and owned by foreign investors. The largest property in Tasmania, a primary producing operation was bought by a foreign investor in the last few months. The Government has done nothing to limit or control foreign investment in Bass or Tasmania. The farm has been sold and is being sold to OS investors.”

Activity and profitability over last 12 months

In 2016 we introduced two new questions to the Budget Ippact Survey, to better track changes in activity and profitabilty. Responses to both questions indicate that things are looking up for many practices. Over half the respondents (58%) are busier than last year. Worryingly, however, this increased activity has not translated into increased profit for the same proportion – only 46.6% report increased profitability. At the other end of the scale, 16% of practices are less busy, but 23,5% are less profitable.    

1 - Q 54 - Q6

Who responded to the survey?

The second set of questions was designed to give a better understanding of the demographics of those who responded. 

The majority of respondents were directors, partners or owners of an architectural practice. Respondents came from firms ranging from small practiticed to firms of over 100 staff. The profile of respondents reflects the structure of the profession in that a large proportion of respondents ran small practices. A wide range of types of work was represented. 

Size of practice

12 - Q7

Location

5 - Q8

Types of work

7 - Q9

Respondents identified a range of other sectors in addition to those available in the tick box section, some of which provided a finer level of detail for available options. These included aged care, master planning, town planning, sport and recreational, heritage and conservation, interior design, access, defence, retail and technology.

How do practices plan to navigate economic changes? 

6 - Q10

The ACA was also interested to know if and how practices engage in business planning to help navigate shifting economic circumstances. Once again, the proportion of respondents indicated that they did has increased since last year. Twenty-three practices gave some insight into strategies:

“Driven by cash-flow management and marketing to obtain further commissions, though we acknowledge that this is by no means an adequate process.”

“Reconsider business scale.”

“Batten down even further.”

“Policy approaches for better design outcomes and urban strategy work.”

“The planning already takes into account which sectors to focus on.”

“Re-focus to ensure targeting right sectors.”

“No change – but continue to set planning and monitor. We have experienced some increase in workload as a result of a focused attention to increasing our relationships with a wider community of potential clients.”

“We need to regularly review our profitability in light of economic forces, and work harder to attract commercial private enterprise as clients.”

“We need to rely less on work from government departments such as Public Works.”

“We need to work harder to attract local govt. as clients.” 

“We will need to wait and see what impacts the latest budget might have on the areas of business in which we operate before deciding whether we need to change our own business plans.”

“Amend SMSF strategies. Increase focus on urban design and infrastructure advice.”

“We will review the internship opportunities.”

“Very careful management of expenses and as wages are our biggest cost we might have to let another person go – and we're very much over having to do this again!”

“Prepare for an increased workload and pressure on salaries.”

“Look at opportunities, but not much hope of seeing change in SA economy.”

“Look to broaden our base of project and clients.”

“Just the same as we always do. Bimonthly forecasting, fee reviews, project planning etc.”

“Normal review of where we are at, future prospects, staffing levels, new opportunities and make required adjustments.”

“Monitor any changes. Seek advice from my accountant. Check budget to see if there are opportunities for architects buried there; regional funding opportunities for example.”

“Continue to tighten belts....”

“Review direction for targeting work.”

 

Respondents roles within practice

 

3 - Q 11

ACA members

Q 12>

The survey was open to all, and we aimed to get a broad a range of responses within the limited timeframe the survey was open for. We were pleased with the high proportion of responses from ACA members. The ACA will continue to advocate for better business conditions for all architects – and we encourage those who are not currently members to join us in this!

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