William Buck has provided a submission to the Government Task Force for the Tax White Paper. We focused on the issues affecting a key sector of the Australian economy; Australian-owned small to medium enterprises. Our submission calls for action in three core areas:
- Reducing the complexity of tax laws
- Reducing the disproportionally high regulatory burden on SMEs
- Making SME-focused legislation improvements
We have outlined each in more detail below.
- Consistent treatment across the taxation system for particular situations, e.g. contractors, to reduce complexity and compliance costs
- Consistent definitions around common concepts, e.g. consolidating the current disparate associates, affiliates, connected entities, family groups, Part 8 Associates, definitions – the breadth of which create a commercial minefield
- Setting a high threshold for anti-avoidance measures (if introduced) so they target only taxpayers with economically significant issues, rather than SMEs
Reducing the regulatory burden on SMEs:
- Increasing electronic interaction with the ATO to reduce compliance costs: our research amongst business owners and senior managers has demonstrated the dramatic effect the migration to electronic reporting to the ATO has had on compliance costs.
- Providing a central contact point for State matters. SMEs need to negotiate multiple revenue offices across Australia – simplifying this to a single point of contact would be far more efficient. For example, a NSW business would deal with the NSW Office of State Revenue who can then disburse the payments to other States as needed.
- Eliminating minor taxes with high administration costs. Examples include FBT – many SMEs spend more complying with FBT than they pay in FBT, and stamp duty on business and share sales.
SME focused improvements:
- Implementing a special purpose entity or electing for existing businesses to be treated as a small business for tax purposes. This would simplify scenarios such as the recent Federal Budget tax cut for small businesses.
- Ensuring any definition of small business has a generous threshold. A definition which requires small businesses to constantly reassess their eligibility would increase compliance costs. A lower threshold could provide a disincentive for growth.
- Capping the effective tax rate on overseas business income. Some SME business owners face 60%+ tax rates on their overseas business income which is a disincentive to expand internationally.
- Reassess the way that deductions for intangibles are determined. Intangible are now amongst the most important assets a business has, but the tax system does not encourage (through allowing deductions etc.) investment in these assets.
Our submission draws on our experience advising over 4,000 SMEs across Australia. It’s designed to support them, and in doing so – support the Australian economy. We intend to play an active role informing and influencing the debate – continuing the role we have as trusted advisors on a larger scale.