Rudd to consider simplifying small business taxation
The Rudd Government is to consider two new measures to simplify small business taxation and reduce small business compliance costs. The potential changes, relating to income tax and GST, are designed to make it easier for small businesses to comply with their tax obligations.An entity flow-through tax regime, developed by the Institute of Chartered Accountants and Deloitte, proposes that ownership arrangements will be set to one side for income tax purposes. Instead, the entity is treated like a partnership with owners taxed at their marginal rates.
The Government has decided to refer the flow-through proposal to the review of Australia’s Future Tax System headed by Treasury Secretary Ken Henry.
The flow-through regime is proposed as an option for small companies and unit trusts with five or fewer shareholders wanting to reduce their compliance costs. The Institute believes this regime will reduce the tax compliance burden associated with incorporation and unit trusts while maintaining the non-tax benefits of company and trust structures.
The Government has also decided to refer the Business Activity Statement (BAS) Easy option for simplifying GST bookkeeping for small business to the Board of Taxation chaired by Dick Warburton as part of the Board’s overall review of the legal framework for the GST.
Streamlining and improving the operation of the GST with a view to reducing compliance costs and removing anomalies from the system will be considered by the Board.
Compliance with GST requirements remains a great administrative burden for small business and the Rudd Government indicate that they are attempting to cut red-tape and “meet the principles of economic efficiency”.