It’s been months in the making, but Prime Minister Tony Abbott is reportedly putting the finishing touches on his tax reform white paper, ahead of its release next week.
According to Fairfax, the Coalition will use the white paper to switch the national conversation to tax reform in a bid to deflect some of the negative attention from an election loss in Victoria and continuing difficulties in passing key budget measures through the Parliament.
While details of what will be in the white paper are scarce, the small business community has a number of tax issues it is hoping the government will include in its reform agenda.
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“The first one is that big business may pay proper tax,” executive director of the Council of Small Business of Australia Peter Strong told SmartCompany this morning.
“It’s affecting the budget and that’s huge. It comes up often when I speak to our members.”
Strong is also hoping the white paper sparks a discussion on company tax, although he admits there would be “no use dropping it if big business are already not paying it”.
While not yet an official policy of COSBOA, Strong says the association is discussing the policy option of dropping the company tax rate to just 5% for SMEs.
“What we believe might be happening is that for business that want to grow, they are struggling to get finance,” he says.
“For that particular group, dropping the company tax rate would be an inducement for the business to keep their profits within the company structure, and then use that to leverage finance.”
Strong says fringe benefits tax is also an area the government should take a closer look at, especially when it comes to enabling small business to provide things like fitness centres and childcare for their staff, while incorporating superannuation into the Pay As You Go structure, would be a welcome change, he says.
For Mark Reynolds, principal of tax advisory for Crowe Horwath, the key issue will be if the white paper promotes certainty and a reduction of complexity for SMEs.
“The biggest issue for SMEs is they are happy to be compliant, they try to be compliant as much as possible, but everything keeps changing,” Reynolds told SmartCompany.
Tax legislation is also overly complex, says Reynolds, who says small businesses are often forced to spend time and money getting financial advice just to ensure they are not inadvertently breaching their obligations.
Reynolds is hoping the white paper will prompt the government to act on two issues in particular: taxation in relation to trusts and how loans out of companies are dealt with.
“It’s come to the point where SMEs don’t know how to deal with taking money out of their companies without having to get a lot of advice,” he says.
Craig Whatman, partner in tax consulting at Pitcher Partners, says it “looks more likely GST will be included in the review”, telling SmartCompany any changes to the GST rate or its base will have flow-on effects for state-based tax regimes.
“If that eventuates and results in either an increase in the GST or a broadening of its base, we would be looking for the state governments, particularly in Victoria, to use that opportunity to do a full review of the tax position in the state,” he says.
Whatman says this could potentially mean changes to state-based taxes such as stamp duty and payroll tax, which are among the biggest bugbears for SMES.
“When the GST was introduced in 2000 it was intended to ultimately provide an alternative source of revenues for the states and that overtime, things like stamp duty would be phased out,” Whatman says.
“But that has taken much longer than anticipated, due to the global financial crisis and states being highly reliant on state taxes to balance their budgets.”