Australia's federal government has called for submissions from family businesses so it can better meet the needs of the country's largest business sector. This is welcome news. Australia's small business minister Joe Hockey made the pledge after a debate with opposition finance and small business spokesman Bob McMullan at a national conference held earlier this year. Mr Hockey says family businesses are the engine of the Australian economy and are major contributors to the country's GDP. He is right. They represent a major percentage of the nation's employers: 80% of all businesses in Australia – some of which have annual revenue as high as A$750m ($545m) – are family-owned. Family Business Australia, the national body representing family-run organisations has called the government initiative the first real opportunity for Australia's family businesses to hear what the government and opposition understand to be the major issues affecting their long-term growth and survival.
Timing in business is crucial. For now the government should be applauded for its sense of urgency on the matter. Let us hope that prime minister John Howard's freshly minted centre-right coalition government makes good on its pledge. But more needs to be done. Over the next decade $1.16trn worth of family businesses will change hands as baby boomers begin to hand over the reigns to the next generation or to outside interests.
Meanwhile, there are other concerns. The FBA believes that if the government does not address high rates of capital gains tax for transferring a business to another family member, and the fact that fewer than 30% of those businesses have a succession plan in place, the ramifications for Australia's economy could be severe. Even a small reduction in the CGT would be welcome. Although Mr Howard's Liberal government is now in a far stronger position than his supporters could have hoped for, he will still have to be careful. His campaign's spending pledges will reduce the government's room for budgetary manoeuvre, particularly if economic growth drops below expectations.
Either way there is a lot at stake. A large proportion of Australian family businesses are small- and medium-sized enterprises. Most were established in the boom era after the second world war by baby boomers who are today reaching the golden years of retirement. So it should come as no surprise that succession is shaping up to be the key issue for Australian small businesses. Research by RMIT University has identified that one of the biggest challenges facing succeeding generations is the reluctance of the founders to give up control of the business. In 2002 RMIT found that 17% of small business owners over the age of 65 were still actively involved in their businesses, as were "a sizeable proportion" of owners over 70. RMIT says the research highlights how important it is for offspring to work with parents to give them some sense of empowerment and involvement possibly on the board of directors.
Trans-generational planning, say owner-managers, is infinitely more complex, time consuming and difficult than they initially imagine. But it is their responsibility to act as custodians of the business and hand it over to the third, fourth and subsequent generations in the same good shape they received it in.
So can the government be of help? It remains to be seen. If, in the near term, Mr Howard's administration offers a workable model to help family businesses, then other governments should take notice.