What happened?
Recently the Government released the Board of Taxation’s report that recommends certain changes to Australia’s tax system to assist small businesses to operate more efficiently throughout their business life cycle (e.g. the start-up phase, the operating phase and the exit phase).
The report focuses on the usual suspects of simplifying processes and cutting red tape by examining the merits of:
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aligning certain lodgement dates (e.g. making the FBT year the same as the income tax year);
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tinkering with thresholds (e.g. increasing the small business entity threshold from $2 million to at least $3 million); and
- making changes to the superannuation guarantee (SG) charge arrangements.
What does this mean for you?
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Easier to get ABNs
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More ATO updates
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Aligning lodgement dates
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Tinkering with thresholds
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Superannuation guarantee arrangements
To assist small businesses in the start-up phase, the report recommends making it easier for small businesses to obtain an Australian Business Number (ABN) to commence business (i.e. by improving online ABN registration & creating a “troubleshooting” ABN hotline to help with ABN registrations).
For small businesses in the operating phase, the report recommends that the ATO update its online decision making tools (e.g. the employee/contractor and personal services income (PSI) tools to help determine who is an employee for superannuation purposes and what the tax consequences are of deriving PSI).
To ensure consistency and avoid double work, the report also suggests aligning certain lodgement dates. Examples include:
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Changing quarterly reporting obligations to an annual one by completing a combined income tax return and annual business activity statement (BAS) based on the same data;
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Aligning the 21 July taxable payments reporting system (TPRS) date with the 28 August BAS lodgement date; and
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Aligning the FBT year (1 April – 31 March) with the income tax year (1 July to 30 June).
Furthermore, the report recommends some tinkering with thresholds, for example increasing the current $2 million small business entity threshold to at least $3 million – and possibly $5 million – as well as increasing the FBT “minor and infrequent” threshold from $300 to $500. It also recommends the development of simplified transfer pricing documentation requirements for small businesses.
On the superannuation front, the report recommends an overhaul of the superannuation guarantee (SG) arrangements from 1 July 2016. The Government still needs to consult with stakeholders, but broadly agrees to the following:
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to work out the SG charge in a new manner (i.e. based on ordinary time earnings (OTE) as opposed to the current method based on salary & wages);
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to simplify and reduce the severity of the SG charge (e.g. by removing the automatic requirement on employers to lodge a SG charge statement when an employer is liable for the SG charge).
How can Nexia help you?
Although the Government may have agreed to some of the recommendations, it still remains to be seen how the Tax White Paper, that is expected later this year, may affect these recommendations.
It is a bit disappointing to see that the changes proposed do not involve a substantial overhaul of the system and seems to be another “tinkering around the edges” exercise. This approach may provide a temporary “band-aid” solution – but it will not solve long-term structural problems.
Only time will tell whether the 2015 Tax White Paper will address the structural issues in more detail – hence it will be very interesting to see how these proposals will be adopted in that White paper.
We will keep you updated on any new developments in this area.
1 - 20 January 2015.
2 - Board of Taxation, Review of tax impediments facing small business, August 2014. This report was originally commissioned in March 2014.
3 - The ATO recently developed these measures –please see our January 2015 Transfer Pricing client alert on the Nexia website.
