Australian Small Business and Family Enterprise Ombudsman Kate Carnell has made a number of recommendations to erase tax time trepidation for small businesses, noting that the coming months are critical.
“The last thing small businesses need is the stress of complying with overly complicated processes while trying to balance their cash flow,” Ms Carnell said.
She is urging the government to allow small businesses to make a single payment to the ATO to cover PAYG(W), superannuation guarantee and GST payments in line with their Single Touch Payroll reporting; reduce the period of review for small business tax returns to one year following lodgement; abolish fringe benefits tax for small business; and maintain permanently the instant asset write-off limit of $150,000.
“The current system effectively forces small businesses to act as the ATO’s unpaid tax collectors,” Ms Carnell said.
Explaining her first recommendation, Ms Carnell noted that by requiring businesses to withhold tax from employees’ wages (PAYGW), the additional superannuation guarantee and the GST, the government is shifting administration responsibilities to small businesses.
“Our plan recommends the ATO should develop a solution that enables the employer to meet these obligations with a single payment to the ATO on each payroll run or monthly. It would need to be phased in to give small businesses the chance to manage their cash flow accordingly,” Ms Carnell said.
Moving on to non-compliance in tax lodgement, Ms Carnell argued that while most small businesses pay their dues, the fact that ATO audits can be conducted as much as five years in arrears is “incredibly disruptive and distressing”.
“Our plan notes the ATO has enough timely data to identify non-compliance within a year of lodgement. When an unintentional error is found, the small business should be given the opportunity to rectify it.”
Addressing FBT requirements, Ms Carnell explained that asking small businesses to pay FBT on items that large businesses provide in-house to retain staff such as meals, gyms and childcare centres, without FBT obligations, is not just.
“Equally, small businesses need certainty to be able to plan to buy major equipment. The government’s recent instant asset write-off threshold increase to $150,000 is welcome, but most small businesses are currently focused on their survival,” the ombudsman said.
“Our plan recommends this temporary policy be made permanent. This would significantly reduce the need for depreciation and cut red tape.”
She noted that while the government is pushing for a business-led recovery from the pandemic, “success is only possible if it is balanced with the support small businesses need to get the economy firing on all cylinders again”.
“Ultimately, small businesses need to be released from the burden of unnecessary regulation and onerous compliance requirements, along with the fear of ATO recovery action and severe penalties,” she said.