GST rules cost SMEs $13.7 billion a year

Small and medium-sized enterprises (SMEs) are forking out over $13.7 billion every year in complying with Australia’s GST rules, according to a new report released by accounting software provider MYOB.

The research, which saw 1,026 SME owners and managers surveyed, revealed that the average SME spends over two full working weeks (84.1 hours) every year in gathering tax on behalf of the Australian Government.

Each SME – of the country’s estimated 2.02 million – is estimated to spend $6,778 a year in GST compliance costs.

“If Australia is to have a debate on the GST then let’s start with the way it is collected and reported. Let’s look at ways to ease the cost and burden on SMEs,” MYOB CEO Tim Reed said.

“The GST represents two full weeks where the owner’s attention is dragged away from the day to day running of their business. This is a significant drain on the productivity and profitability of SMEs.”

Of the average 84.1 hours SMEs spend on GST commitments, 64 hours were found to be performed by owners and managers themselves.

“If the Government’s focus is on improving Australia’s productivity and reducing red-tape, then easing the burden of GST compliance should be a priority,” Mr Reed said.

SMEs spend an average of 78.2 hours a year recording tax information needed by the Australian Taxation Office (ATO), making it the biggest GST-related issue affecting small and medium businesses in Australia.

The need to assess each invoice in order to determine if GST is applicable and the assigning of GST-free transactions into eight categories – based on according ATO GST-Free codes – are being cited as major elements of the problem. MYOB said assigning codes “has nothing to do with the collection of GST revenue,” because these only relate to GST-free transactions.

“We need to simplify the GST so that small business operators need only determine if a transaction is one where GST applies or if it is GST-free,” Mr Reed said.

“The need to allocate a GST-free code to each transaction results in uncertainty, confusion and compliance risk. It has nothing to do with the GST the company is required to pay.”

While certain groups, such as CPA Australia and the ACCI, are in agreement that a rise in tax to 15 per cent would cut a range of productivity-damaging taxes, a new report by accounting firm Bentleys suggests otherwise.

New data from Bentleys’ The Voice of Australian Business Survey, using results from 328 participants, revealed 72 per cent of businesses would not support an increase in the rate of GST. 69 per cent of businesses said Australia’s 10 per cent GST rate was ‘about right.’

Tax complexity was also highlighted in Bentleys’ findings, which pointed out that 20 per cent of businesses indicated Australia’s taxes were ‘difficult to understand.’ Smaller businesses were found to have less understanding of taxes, with 28 per cent of micro businesses claiming trouble with tax complexity, while 18 per cent of small businesses and 9 per cent of medium businesses claimed the same.

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