The tax system makes many impositions on small businesses, not all of them welcome.
The time it takes many SMEs to comply with their tax and related obligations, and generally interact with the tax system, places an onerous burden on an already hard-working sector of the economy. The vast majority of businesses are small businesses with turnover of less than $2 million per year.
Well, it's time for small businesses to have their say.
In a welcome development, the government has asked the Board of Taxation to conduct what it calls a "fast-track" review to identify features in the tax system that are hindering or preventing small businesses from reaching their commercial goals. In making the announcement, the government said it was "fully committed" to the Tax White Paper process and that the board's review will complement the process with a dedicated focus on the small business sector to drive innovation and jobs growth.
The government said it wanted small business owners to spend less time on paperwork and more time and resources on growing their business and that "we can start by making their dealings with the Australian Tax Office simpler, which what this review is about". Loud applause here! Parliamentary Secretary to the Treasurer, Steven Ciobo, said the board will draw on its extensive links with small business and the expertise of its advisory panel in developing its report to the government before 31 August 2014.
Ciobo said the review, focused on impediments in the tax system, "will be an opportunity to compile and, importantly, to prioritize areas for possible future reform". In addition, he said the government will examine further how it can support small businesses to grow, as well as the appropriate taxation of trusts, by considering these issues in the context of the tax White Paper. The board has been asked to work closely with the Treasury and ATO in preparing its report.
The terms of reference for the review state that the board's report should provide business and broader community perspectives on issues in the tax system that are of most concern to small businesses, and identify the short- and medium-term priorities for small business tax reform, "while noting that frequent change is often cited as a contributing factor to the compliance burden facing small business". In doing so, there should be a particular focus on high priority options for simplification and deregulation, the terms of reference say.
While the aims of the review are admirable and worthy of pursuit, we have heard this all before. One hopes this review will seriously involve small businesses and their representatives directly. The government has asked that the board utilise its extensive links with tax professionals and conduct targeted consultation with key business groups. The government expects the report to utilise and build upon the conclusions of the board's scoping study of small business tax compliance costs, which was completed in December 2007.
That study confirmed that compliance costs have a proportionately greater impact on smaller businesses than on larger businesses and that these compliance obligations appear to have been growing over time. As the small business sector is a key contributor to growth and employment, the study said reducing small business compliance costs "is vital to the Australian economy". More loud applause! Those comments are still valid today.
In their own interests, SMEs should be prepared to make submissions to the inquiry, either individually or through representative bodies. They should keep an eye out for submission details from the Board.
Small business consultation panel
The ATO too is well aware of the importance of the small business sector. It has invited small business owners to apply to join its new small business consultation panel to help boost the agency's small business expertise. Small business operators interested in applying must have an annual turnover of less than $2 million and have at least two years experience running a business. However, taxation, consulting or accounting experience is not necessary.
The ATO says business operators joining the panel may be contracted on a short-term, as-needs basis to participate in consultation activities including workshops and user testing to provide feedback from a small business perspective. Successful applicants will be paid for their services.
ATO second commissioner Neil Olesen said the panel will help the ATO to better understand the way small businesses interact with the organisation and other government agencies. He said the panel's objective is to explore opportunities to reduce the time it takes for business operators to comply with their employer, superannuation and tax obligations so they can get back to the important job of running their small business. "Hear hear" I hear you say!
All this attention on small business is welcome, but SMEs should not let the opportunities to make their views known slip by.