The Federal Government recently announced that the Board of Taxation will conduct a fast-track review of impediments in the tax system that unreasonably affect small business. The announcement was made by the Parliamentary Secretary to the Treasurer, the Hon Steven Ciobo MP, at our 29th National Convention in Hobart.
There is significant work to be done in respect of simplifying existing tax laws to alleviate the compliance burden on small business and so we welcome this review by the Board of Taxation. As practitioners would be well aware, measures which were originally brought in to assist small business and simply their tax affairs have proved to be prohibitively complex.
The current small business CGT concessions are an obvious example. The operation of these concessions is problematic due to the complex nature of the rules. The provisions are so complex that it is difficult for a small business to confirm that they qualify for a concession under the rules. Seeking advice on whether the concessions could apply can prove too costly for some.
The rules were intended to provide a simple tax concession, but taxpayers often find it is not worth their while trying to determine if the concessions apply. The concessions should be simplified to make them more easily understood and more readily able to be applied.
There are other areas for reform that immediately come to mind: simplifying carry-forward loss integrity measures and identifying areas in which ATO processes and interactions with small business can be simplified.
A review of trust taxation would also provide certainty and reduce compliance costs for the hundreds of thousands of businesses that operate through trusts. The Government will consider this in the context of the Tax Reform White Paper later this year. That broader review should not discourage the Board from considering the possibility of creating a separate ‘small business entity’ structure through which small business can operate, amalgamating the benefits of existing structures: the company, trust, partnership and sole trader.
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.
The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.