Courier and cleaning businesses look set to face greater regulatory burdens after the federal government outlined plans in its 2017 budget to extend measures in the fight against the nation’s $21 billion so-called “black economy”.
Tuesday’s budget papers saw the government suggest it could recoup $318 million in revenue through a plan to extend the taxable payments reporting system (TPRS) to contractors in the courier and cleaning sectors.
The scheme, which currently applies to the construction sector, compels businesses to report the individual and collective payments it makes to contractors each year to the Australian Taxation Office. Under the budget proposal, businesses in the courier and cleaning sectors would have to start collecting this information at the start of the 2018-19 financial year, in preparation to tell the ATO how much they are paying contractors from July 1, 2019.
Having this week released the interim report from its Black Economy Taskforce, the government also outlined plans in the budget papers to ban certain point-of-sales systems that could allow businesses to underreport their income, and also committed to measures for fighting multinational tax avoidance by extending pre-existing laws to companies using foreign partnerships and trusts.
Principal at Perigee Advisers, Lisa Greig, tells SmartCompany this year’s federal budget is “riddled with integrity measures” and will result in increased compliance burdens for many SMEs.
She says the plan to extend the TPRS, which comes off the back of a recommendation made to government in the Black Economy Taskforce interim report, is simply a matter of authorities looking at areas of non-compliance, and seeing which businesses they can place added scrutiny on.
“They’ve done their benchmarks and said, ‘who else we can tag with the contractors’ brush?'” she says.
While there is a concerted effort from the government to recoup funds from those operating outside of the tax system, Greig says unscrupulous providers are likely to find a way to continue to avoid paying tax.
Meanwhile, she says many small business owners are already confused by the complexities of compliance measures, and there’s not much being done to simplify matters.
“All the tweaks in the budget are adding to the compliance costs for SMEs,” she says.
On Wednesday, the government made the interim report from its Black Economy Taskforce, which was established in December, available for public consultation.
The report, led by taskforce head Michael Andrew, highlights that Australia has made “few inroads” in fighting the hidden economy, and current approaches tend to focus on symptoms of the problem, rather than the causes.
The taskforce made nine initial recommendations to government, including the extension of the TPRS to new sectors, as well as potentially developing tax or other incentives for small businesses to switch to “non-cash business model[s]”.
Marking the contracting and cleaning sectors as areas of significant risk, the report also devotes time to how government can shift community attitudes about the payment of tax.
The taskforce says community attitudes have the potential to undermine the fight against the black economy, with the idea that “everyone” takes cash under the table leading more to be tempted not to comply with tax law.
“Similarly, if people do not trust their tax authorities or have little faith in governments spending their tax dollars wisely, they may be reluctant to comply with their tax obligations,” the report observes.