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Business simply avoiding system

THE jury is out on whether the Simplified Tax System is worth implementing, more than one year after its introduction.

The Australian Tax Office has no figures showing how many businesses have taken it up and it appears none will become available until at least the end of this year.

However, feedback from the ATO seems to indicate that interest in the STS is growing.

Some accountants report that they have put their clients onto the STS and have had some good results with it. Others are saying the STS does not save their clients any time or money and can prove a nightmare as a business gets close to the $1 million annual turnover threshold.

Fallon Group partner Tony Ince said he had heard varying reports over the veracity of the STS.

“The feedback I’m getting from some accountants is that they have a number of their clients on it and find it to be pretty good,” he said.

“However, I think the proof of the pudding will be seen a bit further down the track.

“In theory it offers an easier system for small taxpayers but my concerns is that, if they grow out of the parameters set for it, they could face a lot more tax work.”

Hayes Knight GTO director Alan Thomas said his firm was using the STS sparingly.

“There are some traps in it as the business approaches the threshold,” he said.

“It also doesn’t seem to make it any easier for some businesses. The STS is a cash-based system and in some cases businesses have to calculate their GST on an accrual basis, so it results in some bookkeeping problems.

“The STS can save some tax in some circumstances, such as when a business has a lot of cash owed to it.”

RSM Bird Cameron tax partner Rami Brass said the STS benefited only a very small group of businesses.

“Out of the 340 clients I have, only six will qualify for the STS and see a real advantage in using it,” he said.

Small Business Development Corporation managing director George Etrelezis said anecdotal feedback he had received indicated the take-up of the STS had been far below what had been expected.

“On paper there are a lot of reasons why there would be benefits, particularly for micro businesses,” he said.

The STS applies to small businesses that have had a turnover of less than $1 million for three of the past four years and business assets, not including premises, worth less than $3 million.

For businesses that operate in groups the turnover threshold involves the entire group’s turnover.

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