Governmental Influences

Definition: 

The government establishes the legal framework within which businesses operate. There are laws to ensure firms do not engage in fraudulent financial activity that could undermine the trust in the financial system. Large penalties exist for individuals or firms engaging in unlawful activity.

Any changes made to the legal framework must be complied with; this acts as a cost to firms, but is generally in support of maintaining a strong economy. Fiscal and monetary policy can also impact firms; fiscal policy is the spending and taxing plan of the government, and monetary policy is the setting of the base interest rate (cash rate) which can change the cost of borrowing money for firms.

Australian Securities and Investments Commission (ASIC):

ASIC is the corporate, financial markets and financial services regulatory body. 

ASIC is an independent governmental body that oversees, enforces and administers the Corporations Act 2001 (CMTH). 

ASIC ensures that financial markets are fair and transparent, and protects consumers in areas of financial planning, superannuation, insurance, and banking.

Company Taxation:

A direct tax in a nation on the profits of a company made within that nation. 

This government revenue is gathered by the Australian Taxation Office (ATO). 

Australia’s company tax rate has recently changed for smaller companies. 

It was 30% (relatively high internationally), but the rate for SMEs (under $50million in revenue) is 25%.

Taxation acts as another cost to business owners. After all expenses are subtracted, firms still must pay tax. 

Many firms undertake measures to minimise their taxable profits—unethically transferring revenue through international subsidiaries to reduce their tax bill. Australia is cracking down on this behaviour.