Businesses hate doing tax returns. But imagine if you had to do it once a week.
And then imagine if the ATO called you up because you made a mistake.
You miscalculated your tax by just one cent.
This seems like a joke, but it’s not. It’s reality for Peta Fielding, who runs Burleigh Brewing Company in Queensland. Thanks to the Alcohol Excise Tax, Fielding has to calculate a weekly tax return to the cent. And the ATO loves to call and check the figures.
“We are definitely in a very heavily regulated space,” she said at the recent NAB Small Business Summit in Queensland, on a panel about deregulation.
“We understand the environment we operate in, but it’s the implementation that causes frustration. You find yourself beating a head against a wall asking “what’s the point of this?”
The worst part? The ATO doesn’t want to talk to anyone else in the business, Fielding says. They only want to speak to her.
“I know it’s not the intention…but my Mondays are very precious to keep building my business and I don’t want to focus on liquor excise.”
The panel featured several major regulators from across Australia’s largest watchdogs and the consensus was clear – more small business regulation needs to be abolished.
Government slow in acting on recommendations
This isn’t just a dreamed-up complaint from owners who are afraid of doing a little work. The Productivity Commission recently released a report about small business regulation with similar results – it’s far too burdensome.
“There is scope for increased targeting of those businesses and activities which present a higher risk to communities, and for adoption of lesser compliance cost approaches for lower risk businesses,” it said.
Warren Mundy, the leader of the study, also told the NAB summit that most recommendations have been ignored by federal and state governments.
“This is really about diligence, and professionalism, and making sure if we can do one thing right it’s to make sure they develop a mindset that suggests, ‘I’m here to help your business’.”
So what is it about small business regulation that is so frustrating? No one complains much about a yearly tax return – what are the laws that are making everyone so angry?
It’s exactly as the Productivity Commission report says – small businesses feel the burden of regulation more because they have less time, fewer staff and more pressure to succeed.
As Mundy pointed out to SmartCompany, most small business owners have to deal with this type of regulation on their own time.
“More widespread use could be made of formal cooperation arrangements between regulators to minimise the overall interaction burden on business,” it said.
Some of these burdens are universal. For instance, businesses hate collecting superannuation and distributing paid parental leave payments. As the Council of Small Business of Australia and various other lobby groups have argued, this could be handled by governments.
The Productivity Commission isn’t the only one saying this, either. There are plenty of smaller, more burdensome regulations and paperwork which take up too much time. An alcohol excise tax is just one, but depending on the industry there are countless forms to complete.
Retailers will often fill out the same forms for zoning for local, state and federal governments, while construction businesses will regularly do the same. Hospitality businesses constantly face food safety requirements – and rightly so – but with form upon form to go with it.
Even Greg Medcraft, Commissioner of the Australian Securities and Investments Commission, admitted at this panel that “registering a business name is much more complicated than it needs to be”.
As the commission report argues, local governments often double up on these regulatory burdens again and again.
ATO Commissioner Chris Jordan even agrees, noting at the summit the success of the Small Business Clearing House, which distributes superannuation for businesses with fewer than 20 employees.
Could this be expanded? It’s not out of the question.
“I would think there would be some scope or benefit to greater numbers through the clearing house,” he says.
“There’s a mechanism and way of doing things through the clearing house, so my first question is whether that can be expanded? If it allows businesses with 20 employees, why not 50, or 100? I don’t know, I need to investigate that.”
The concept of differing definitions for small business isn’t novel, either. As Peta Fielding laments, there are a range of different definitions based on what tax you’re paying at the time.
“It’s a little bit of an identity crisis,” she says. “I’d say we’re a very small business…but in liquor excise we’re well beyond what’s considered a small business.”
And that isn’t the only problem. Many times the issue isn’t the regulation itself, but rather the fear – small businesses aren’t proactive about contacting regulators because they fear a backlash for doing something wrong.
Fear of the regulator
Chelsie Easton, who runs Fusion Cycles in Brisbane, said at the summit her business became aware of several workplace health and safety obligations, but was wary of contacting the relevant authority.
“We thought they would hit us with a fine,” she says. “But they were very helpful and gave good guidelines.
“In fact I can’t make a blanket statement that it’s been bad or good. I can’t say I’ve had the most fun with the ATO, but with WorkCover we’ve had a great experience – and with the Office of the Fair Trade as well.”
The idea that business owners might be nervous about dealing with a regulator is not uncommon, says Mundy.
“About half the regulatory problems are about people working with people, and then the other half are about bad regulations.
“With larger regulators, the problem exists in transmitting the message down to the people on the job. Sometimes bad regulatory experiences are just because the regulator is having a bad day.”
While reform won’t come overnight, Mundy says the onus is on the regulators to change the regulatory environment in Australia – and not for businesses to just suck it up.
“It’s really important for us as policymakers to advocate for regulatory change,” he says.