Tax cheats or desperate for help?
Australia’s small business sector was under attack this morning, labelled tax cheats after a report from the National Auditor says that 600,000 small businesses with turnover of less than $2 million owed the tax office a total of $6.4 billion.
Small Business Minister Fran Bailey leapt on the tax cheat description, saying it was not a fair label. But she also ruled out any change of direction, saying the tax office has $40 million over the next four years to educate businesses about their obligations.
She also highlighted other programs to assist small business with financial literacy. “Small businesses also have to accept responsibilities for their businesses,” she says.
But none of these measures will solve the problem that Australia has a whopping proportion of the small business sector in debt to the tax office, which recently announced that it will aggressively chase tax debts by SMS, by phone calls at dinner time and through many other methods.
So now what? There are almost two million businesses in Australia. If 600,000 owe debts to the tax office, what future does the sector have? Will the tax office force more than a quarter of Australia’s businesses to close their doors and sell their assets to pay the debts?
For a start, there needs to be a lot more research done into this area (not helped by the fact that a major report called The Characteristics of Small Business has just been culled by the Australian Bureau of Statistics).
There is so little known about the micro-business sector despite more people joining its ranks due to changes in WorkChoices and work practices, whereby more people were setting up their own business rather than being an employee.
While some people will do extremely well, many struggle, barely making enough to pay tax.
As reported in SmartCompany last week, the latest figures from the ABS show that half of all start-ups that don’t employ anyone fail within three years, while 80% of start ups with employees were still operating three years later. More needs to be done to help Australian businesses grow and employ.
The tax office also needs to release more statistics about who owns what. As Bailey says: “We don’t know if it is a lot of small businesses owing a little bit or it is a few businesses owing a lot.
“What we do know is the tax debt began to grow after the GST was introduced and there were changes to company tax. The introduction of pay-as-you-go meant that businesses often had to pay tax before they had the money in the door.”
Lastly, the assumption by the tax office that small businesses could pay this debt but refuse also needs to be tested.
The whole of government and associated agencies needs to sit down and have a good look at their policies, red tape, tax obligations and regulations for the small and micro business sector. A major overhaul is needed.
Feedback: Do you think the system in Australia is geared towards making micro and small business pay tax and not helping them make profits?
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Do you owe tax? Can you afford to pay but won’t? Have your say.
– Amanda Gome
Will Labor be left holding the baby on broadband?
Communications Minister Helen Coonan is expected to announce the details of a public review and tender process this week that she hopes will put a rocket under the telcos, which she hopes will put their own money into constructing a broadband network.
As the federal election rapidly approaches, broadband is one of the few real points of policy difference between Labor and the Coalition. Labor has promised to commit $4.7 billion in public funds to get a fibre-to-the-node broadband network off the ground.
But for the moment, the ball is in the Government’s court. Coonan is under serious pressure to get a private broadband proposal off the ground before the federal election later this year, and she may yet succeed in doing so.
This prospect raises an intriguing scenario – could a potential Labor government be left with no choice but to implement the Coalition’s broadband policy?
Although Labor refuses to speculate on what is a hypothetical scenario, telecommunications experts confirm the issue is real. Analyst Guy Cranswick says the issue will be determined by just how far the G9 consortium of companies or Telstra proceed in implementing their proposals before the election.
“If a tender has been accepted and legislation gone through to implement, it could be extremely difficult and costly for an Opposition to come in and overturn it,” Cranswick says. “There would be serious costs involved, and if it’s already well down the track I just can’t see it happening.”
Cranswick predicts the politics of trying to overturn a private proposal to construct a broadband network and replace it with one that involves spending billions of dollars of public money would also be difficult.
“It would be hard for them to explain what would be gained from upsetting what was in place and go ahead with their plan when something was already in train,” he says.
Telecommunications analyst Paul Budde says if the Government ends up doing a “dirty deal” with Telstra to get its broadband network than can’t be undone, Labor’s key task may be to get the correct regulatory settings in place.
“Labor could provide the regulator with extra powers to ensure the competition and consumer issues are not undermined. If Telstra is able to charge the sorts of outrageous prices it is currently talking about, say $80 per month retail at minumum, very few people would be prepared to use it, so the regulator might need to be given the powers to fix that,” Budde says.
– Mike Preston
New Zealand borders are falling for business
There are now few formal barriers to doing business in New Zealand and the few barriers left are being cleared away, New Zealand Prime Minister Helen Clark told a Trans-Tasman Business Circle lunch in Melbourne yesterday.
“We want to reach a point where a company in Auckland can do business in Melbourne as easily as it can in Wellington,” she said.
The to-do list includes:
- Doing away with unnecessary transaction costs.
- Making it easier to offer securities in both countries using the same offer documents and structure.
- Simplifying cross border insolvency procedures.
- Making trans-Tasman company registration easier.
- Making it easier to ban directors in one country when they have been banned in another.
- Looking at the portability of private retirement savings across the Tasman.
- Considering an investment protocol.
Clark says New Zealand, which has had near continuous growth for a decade, predicts growth of 3.1% for the year to March 2008, with a slowdown in the economy last year bottoming.
She says New Zealand exporters have shown extraordinary resilience to interest rates and monetary policy designed to curb inflation (the official NZ interest rate is 8%.)
She has also named 2007 as the Year of Exports with the country’s budget tax reforms (corporate tax rates are now 30%) and R&D changes (tax credits of 15% of eligible expenditure) aimed at promoting investment, R&D and export.
– Amanda Gome
WorkChoices hits union pay deals
New collective bargaining pay data released yesterday suggests that WorkChoices has undermined the ability of unions to win pay rises for their members.
Workers on non-union collective agreements that were agreed in the March 2007 quarter achieved an average annual wage rise of 3.9%, better than the 3.7% achieved by workers through union collective agreements.
Data going back to March 2004 shows union collective agreements have consistently produced wage rises equal to or greater than non-union agreements until March this year, the one year anniversary of WorkChoices. One of the key changes introduced by WorkChoices was to make it more difficult for employees to take industrial action, a key weapon for unions in wage negotiations.
And it seems that workers’ dissatisfaction with WorkChoices is waning (see trends for new figures. (steve, please link) Meanwhile Labor has cited in Parliament a leaked Government document as evidence that Howard plans to force 1.5 million workers on to individual contracts.
– Mike Preston
Self-employed missing out on super
The self-employed may be missing out on the superannuation revolution and could struggle to provide themselves with a decent income in retirement, according to a new report on Australia’s superannuation savings.
The Association of Superannuation Funds of Australia report’s analysis of 2003-2004 census data shows that 24.3% have no super at all, while 70% of men and 90% of women have a super balance lower than the $100,000 required for a modest retirement.
The self-employed would be well represented in the most vulnerable “nil” category because of “the relatively low coverage rate amongst the self-employed”, the report’s author says.
The report also finds that less than 20% of current retirees have enough super to benefit from the Government’s much-vaunted abolition of the exit tax on super. The report’s author says increasing the Government’s super co-contribution is a better way of helping most people increase their retirement savings.
Are you putting enough into your super? Are you worried about it? Email [email protected]
– Mike Preston
End of a family era at Multiplex
The Roberts family has decided to sell its 26% share of building giant Multiplex to the Canadian private equity firm Brookfield Asset Management after 45 years at the helm. The sale follows the death last year of Multiplex founder John Roberts.
Brookfield, which already holds 4.2% of Multiplex, has offered a put and call option for $1.1 billion for the family’s stake. The offer is subject to Brookfield securing 50.1% of Multiplex shares, but has been recommended by the board.
The family had been talking to Brookfield about a joint venture since January, but former managing director Andrew Roberts told The Australian newspaper that the Multiplex share price had moved too high for the family to participate in a joint venture.
– Jacqui Walker
Domestic tourism up
Domestic tourism is up, with a 5% growth in the number of overnight holidays for the year ending 31 March 2007, according to the latest tourism research released today.
The new report released by Tourism Research Australia, Travel by Australians (March quarter 2007), reported domestic tourism expenditure rose by 7% to $55.9 billion for the past 12 months to March 2007, with 54% of this in regional Australia.
Domestic air travel also increased by 15% over the past 12 months.
– Jacqui Walker
Retailers are in for a champagne year according to Access Economics’ Retail Outlook released today. The economists say retail sales are currently well above trend, and are likely to grow even more strongly in coming months. Access forecasts revenue growth will surge 4.9% in 2007-2008 after a strong 4.4% growth in 2006-2007.
But other economic data out today (consumer sentiment, housing and employment figures) is more moderate.
New home sales remain well below 2006 levels, despite a 7.1% increase in April 2007, according to the Housing Industry Association. There were 8776 new home sales in April 2007, 14% below the same time last year.
Employment growth may stay steady at around its long-term trend rate of 2.5% a year in the near future. The Department of Employment and Workplace Relations Leading Indicator of Employment fell in the month to May 2007 by a couple of points.
The Westpac-Melbourne Institute Index of Consumer Sentiment fell by 2% in June 2007, a predictable reversal after last month’s unprecedented 7.5% rise. Nearly all components of the index fell including expected strength of family finances (down 0.2%) and expected strength of economic conditions (down 3.8%).
The S&P/ASX 200 has taken a bit of a hit this morning, dropping 0.6% to 6203.0 at 12.05pm. At the same time, the Australian dollar is trading at US84.22c, down on yesterday’s US84.31c close.
– Mike Preston