The Government will hand the Australian Taxation Office an extra $445 million over the next four years in order to crackdown on the cash economy and GST compliance, and expects to gain over $3.2 billion in lost revenue as a result.
But in a trade-off for small businesses, the Government will reduce GST compliance costs and simplify some tax requirements.
The funding comes after repeated efforts from the Australian Taxation Office over the last year to stamp out cash economy rorts and increase GST compliance in small business.
The Budget has marked a further $107.9 million for the ATO to address businesses operating in the cash economy which may gain “unfair competitive advantages”.
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The increased cash economy compliance activity is expected to raise the Government an additional $491.8 million over the next four years, and will cost the ATO another $39.9 million in administered expenses during that same period. About $146.7 million in collections will be paid to the states and territories due to GST collections.
“The measure will assist Australian small business to compete on a level playing field by addressing unfair tax practices through increasing the visibility of the ATO in the community,” the Budget papers stated.
Additionally, another $337.5 million will be provided for funding activities to promote voluntary GST compliance, in order to establish “a level playing field for small business”.
The Government predicts it will get an additional $2.7 billion in lost revenue over the next four years as a result of the increased funding.
“This measure will address issues relating to fraudulent GST refunds, systematic under-reporting of GST liabilities, non-lodgement of GST returns and non-payment of GST debts,” the budget stated.
But in a win for small business, the Government has said it will increase funding for reducing GST compliance costs in order to help SMEs.
The Government intends to do the following:
- Restructure margin scheme provisions. These provisions currently help businesses work out the amount of GST payable when selling a property. They will be clarified and simplified so businesses can be more precise when calculating tax.
- Increase the financial supply threshold. The Government will increase the threshold at which busineses interact with financial supply provisions from $50,000 to $150,000 of input tax credits.
- Introduce GST protective measures. The Government will restrict the amount of ways businesses can take advantage of the reduced input tax credit concessions through the bundling of services.
- Small business concessions. The Government will now allow small businesses accounting for GST on a cash basis to claim input tax credits upfront, in relation to hire purchase agreements.
“This change will significantly assist those businesses that have been forced into higher cost chattel mortgages following the introduction of the GST,” assistant treasurer Nick Sherry said in a statement.
Sherry said these reforms, along with the simplification of some cross-boarder GST transactions, will assist businesses in calculating their tax more accurately.
“Australian businesses showed great resilience during the global recession in keeping their doors open and people in work,” he said.
“These reforms are about delivering on the Rudd Government’s commitment to making the day-to-day lives of businesses easier.”