The Federal Government must establish a GST education office for small business – independent of the tax office – to ensure smooth implementation of the GST.
The Federal Government must establish a GST education office for small business – independent of the tax office – to ensure smooth implementation of the GST.
The Society of CPAs’ tax director Angela Ryan said this was a critical issue now that the GST legislation had been passed. She said small businesses will be the hardest hit when it comes to dealing with the GST.
“Without proper resources dedicated solely to small business education there is a risk the GST will force business closures and ongoing chaos,” Ms Ryan said.
“There is a huge amount of confusion and misinformation as a result of the lengthy political process to get the GST bills passed. It is time for clarity if we are going to see the theoretical tax reform process turned into a reality.
“While the tax office is establishing a comprehensive education program, many small business people will be unwilling to approach the tax office for information. Whatever the rhetoric about ATO officials being advisers and not auditors, many small business people will remain suspicious of the ATO.
“The danger is that small business will risk getting the implementation of the GST wrong rather than allowing the tax office to visit their business or have the ATO advise them directly.
‘This could prove very costly indeed – not just for the business, but in terms of political capital for the Government and the Democrats as well.”
Ms Ryan called on the Government to fund a GST education office headed by a member of the private sector who would be a public face independent of the ATO. The concept was used successfully in New Zealand where the office was considered the main factor in the country’s smooth transition to the GST.
“The Government cannot afford to sit back and relax now that the GST has been passed. It will be an immense task to make small business GST ready in twelve months. The hard work that will make or break this tax system is really only just beginning.”
The Society of CPAs has also urged the Federal Government to link compensation to turnover for small businesses facing ongoing compliance costs under the GST.
Ms Ryan said GST compensation for businesses dealing with GST free food has disappeared from the amendments presented to the Senate.
“While the parties have acknowledged that compensation is an important issue, it is a glaring omission from the GST amendments,” she said.
“The Government must consider not only compensation for GST free food, but ongoing compensation for the small business sector.
“For many proprietor-run small businesses, time really is money, and this use of time to work purely on tax administration must be compensated in some way.
“One method of compensating this sector is to allow these businesses to retain a portion of the GST they collect. This practice is followed in some European countries that operate VAT systems.
“However, a better system would link the compliance cost compensation to turnover, so that businesses making GST free sales would not miss out.
While such measures do not reduce compliance costs, they do offer compensation to small businesses, and with the more complex package now to be implemented the need for compensation is more crucial.
“The fact that the compensation issue was in the first draft of the amendments suggests that there is sympathy for the small business sector. It is time, however, to turn that sympathy into something that will actually help small business make the transition to the GST,” Ms Ryan said.
Research by Curtin University academic Jeff Pope indicated the average annual GST compliance on business was $1500. Studies in New Zealand suggested 60 per cent of the total compliance costs fell on businesses with annual turnover below $NZ250,000 (about $205,000).
In addition, fees paid to external advisers accounted for only 15% of the total compliance costs, with the proprietor’s time being the major cost component.
The Society of CPAs’ tax director Angela Ryan said this was a critical issue now that the GST legislation had been passed. She said small businesses will be the hardest hit when it comes to dealing with the GST.
“Without proper resources dedicated solely to small business education there is a risk the GST will force business closures and ongoing chaos,” Ms Ryan said.
“There is a huge amount of confusion and misinformation as a result of the lengthy political process to get the GST bills passed. It is time for clarity if we are going to see the theoretical tax reform process turned into a reality.
“While the tax office is establishing a comprehensive education program, many small business people will be unwilling to approach the tax office for information. Whatever the rhetoric about ATO officials being advisers and not auditors, many small business people will remain suspicious of the ATO.
“The danger is that small business will risk getting the implementation of the GST wrong rather than allowing the tax office to visit their business or have the ATO advise them directly.
‘This could prove very costly indeed – not just for the business, but in terms of political capital for the Government and the Democrats as well.”
Ms Ryan called on the Government to fund a GST education office headed by a member of the private sector who would be a public face independent of the ATO. The concept was used successfully in New Zealand where the office was considered the main factor in the country’s smooth transition to the GST.
“The Government cannot afford to sit back and relax now that the GST has been passed. It will be an immense task to make small business GST ready in twelve months. The hard work that will make or break this tax system is really only just beginning.”
The Society of CPAs has also urged the Federal Government to link compensation to turnover for small businesses facing ongoing compliance costs under the GST.
Ms Ryan said GST compensation for businesses dealing with GST free food has disappeared from the amendments presented to the Senate.
“While the parties have acknowledged that compensation is an important issue, it is a glaring omission from the GST amendments,” she said.
“The Government must consider not only compensation for GST free food, but ongoing compensation for the small business sector.
“For many proprietor-run small businesses, time really is money, and this use of time to work purely on tax administration must be compensated in some way.
“One method of compensating this sector is to allow these businesses to retain a portion of the GST they collect. This practice is followed in some European countries that operate VAT systems.
“However, a better system would link the compliance cost compensation to turnover, so that businesses making GST free sales would not miss out.
While such measures do not reduce compliance costs, they do offer compensation to small businesses, and with the more complex package now to be implemented the need for compensation is more crucial.
“The fact that the compensation issue was in the first draft of the amendments suggests that there is sympathy for the small business sector. It is time, however, to turn that sympathy into something that will actually help small business make the transition to the GST,” Ms Ryan said.
Research by Curtin University academic Jeff Pope indicated the average annual GST compliance on business was $1500. Studies in New Zealand suggested 60 per cent of the total compliance costs fell on businesses with annual turnover below $NZ250,000 (about $205,000).
In addition, fees paid to external advisers accounted for only 15% of the total compliance costs, with the proprietor’s time being the major cost component.
