The National Institute of Accountants (NIA) has recommended to the Federal Government that small businesses should be compensated for the time they spend being unpaid tax collectors.
Increases in the level of complexity of tax laws have meant compliance has become more onerous with the costs on small business being disproportionate to their ability to cope.
“With constant changes to fringe benefit tax, capital gains tax, goods and services tax, income tax and compulsory superannuation, our taxation system has become too onerous for most taxpayers, requiring the need to engage a professional tax advisor,” Andrew Conway, NIA CEO said. “Access to quality tax advice is critical to the integrity of the tax system. In fact, the percentage of businesses that engage a tax practitioner to lodge their tax return now exceeds 95 per cent.”
“While it is important for small businesses to continue to use tax professionals in this environment of increasing complexity, the Government should compensate small business in the form of a non-refundable tax offset when they engage a registered tax professional to undertake certain work on behalf of the ATO,” he said.
In order to limit the cost of this initiative, the rebate should only be available to reduce tax otherwise payable and not be carried forward. Eligibility rules could be introduced to maintain integrity around the measure, by using the existing tax definition of small business (turn over less than $2 million). Of the 2 million businesses in Australia, over 1.89 million have a turnover of less than $2 million.
This proposal would have the added benefit of enabling the tax practitioners to diversify their client base to make up for any lost compliance work resulting from simplification of tax returns resulting from possible proposals emerging from the Henry Review of the tax system.
“The introduction of the Tax Agent Services legislation will further protect consumers and ensure the integrity of information provided to the ATO as tax agents are subject to higher professional and ethical standards,” said Mr Conway.
This proposal forms part of the NIA’s pre-budget submission to the federal government which provides measures that could assist Australia’s small businesses. The full submission can be found on the NIA’s website.