Tax reform proposals more small business friendly

The Australian Society of Certified Practising Accountants has come up with a detailed proposal to make tax reform more ‘friendly’ for small business, as is revealed in its submission to the Review of Business Taxation.

ASCPA tax director Angela Ryan said there had been much anticipation surrounding the release of the paper as it was the first time solutions had been identified to reduce the myriad of problems faced by small business taxpayers such as red tape, compliance costs and tax administration.

“We are all aware of the types of problems small businesses face but this is the first time these problems have been laid on the table and real solutions proposed,” Ms Ryan said.

“Compliance costs in Australia are relatively high when compared to other countries. In addition, they are regressive, so the small business sector carries a disproportionate share of those costs.

“It is important that tax reform does not add to this burden.

“In this submission we are really showing how to make tax change for the small business sector better, as we look at getting the policy structure right, then following through with cost-effective administration.

“Often what costs small business the most are the details that get forgotten when big tax changes are made.

“For example, just simplifying invoices for GST will greatly lighten compliance costs of the tax for small business,” Ms Ryan said.

More than 50 recommendations are made in the report.

Major points include using existing financial accounts as a basis for paying income tax, extending and simplifying capital gains tax concessions, abolishing fringe benefits tax and shifting liability for the tax on fringe benefits to employees, small business taxpayers keeping a portion of the GST they collect to offset the compliance costs of the tax, keeping the GST base broad and applied at a single rate, establishing an information and education office to assist small business with the GST, separating the service and enforcement arms of the tax office and having the tax office issue warnings rather than penalties for first offences.

“The broader tax reform debate has all but ignored the needs of the small business sector,” Ms Ryan said.

“This is not because the problems are not well understood but because until now nobody has offered solutions.

“This is the first submission to the Ralph Review that not only identifies the problems but also makes clear recommendations that offer solutions.

The ASCPA submission is also being made available to the Small Business Consultative Committee as some of the issues raised are outside of the terms of reference of the Ralph Review.

Ms Ryan said the Society welcomed the general approach to tax reform currently occurring.

Many of the proposals and policy options contained in ANTS and RBT specifically address the needs and concerns of small business taxpayers.

There is no doubt the sector, so important for future economic growth and employment opportunities, will benefit considerably from long overdue reform.

For example, changes to the nature and timing of tax payments made in respect of their own liabilities and liabilities of others (including PAYE and FBT) will assist businesses considerably.

But there are other areas where the changes need to be very carefully considered in the light of their potential to reduce the sector’s capacity to comply with its tax obligations or to increase the costs of complying with the Australian tax system (which already suffers relatively high compliance costs when compared to many similar countries).

Those compliance costs are also highly regressive, with the result that the small business sector carries far more than its proportionate share of those costs.

This will be exacerbated with the introduction of the GST.