Tax watchlist: Be prepared for change

The new Government has barely warmed the seats in Canberra, and so far the tax regime is business as usual. But don’t be complacent. By TERRY HAYES of Thomson Legal & Regulatory.

By Terry Hayes

A new year, a new government, but still the same old tax laws (so far!).

The new Federal Labor Government has been making some positive statements about easing the burden (regulatory and otherwise) for small business. This is welcome, and in that regard the Government has already flagged that it will introduce a “BAS Easy” option for reporting GST (see my column on Labor’s tax plans). How soon that will happen is unknown, but, as always, “the devil may be in the detail”. 

We hear that the Government’s razor gang is already well on the way to cutting all sorts of government expenditure, and the effects of that on SMEs will need to be examined closely.

The income tax cuts announced during the election campaign have been under a cloud, but Prime Minister Rudd has repeatedly said they will go ahead. In fact, he has recently confirmed that “the tax cuts as we promised are untouchable”!

The Labor government has also promised that employers will not be required to contribute beyond the existing compulsory 9% Superannuation Guarantee.

However, the Government believes it would be “desirable” over time to provide additional incentives to low and middle income earners to add to the 9% through personal contributions and Government incentives (such as an enhanced co-contribution scheme) to achieve a total 15% savings target. SMEs will need to watch this space!

The Rudd Government has said it supports the previous Coalition government’s proposal to remove the double penalty on employer late Superannuation Guarantee payments. Where the compulsory 9% super is paid late, there is effectively a double penalty – while the employer does pay the 9% (although late), a penalty equal to that amount is also levied on top. The removal of this “double whammy” will be welcomed by all SMEs, especially in the current climate with interest rate and inflationary pressures mounting.

While action at government level will be keenly watched, the tax office has not been idle either. It has recently reminded businesses of some useful tips and information to help them start the new year “on the right foot”.

Topping the list is good record keeping – a topic I’ve written about all too often. The sorts of tips extolled by the tax office include:

• Recording all information from business transactions in a cash book, either electronically or manually.
• Recording payment summaries for salary, employment termination payments, and reportable fringe benefits.
• Storing all documents in a safe place for a period of five years.

At the same time, the Tax Commissioner Michael D’Ascenzo says that, under the tax office’s “Small Business Assistance Program” (personal visits, seminars, workshops and phone support), it expects to make more than 1000 visits to small businesses in 2008.

The Commissioner says that the objective is to “help new and existing businesses get on track with their tax affairs and resolve any issues they may be experiencing”. D’Ascenzo also says that any information shared with the tax office will be kept confidential and will not be used for any other purpose.

On these visits, the tax officer will work through and discuss specific tax information of interest to the business owner, including:

• Registering for an ABN.
• Understanding and registering for GST.
• Understanding employer obligations (eg PAYG instalments and withholding and FBT).
• Understanding superannuation obligations.
• Understanding activity statement and record-keeping requirements and making use of electronic products such as e-record.
• Understanding the range of other taxes and obligations that might apply to the business.
• Lodging activity statements online via the tax office’s “business portal” (includes set-up and registration).

A visit can be arranged by phoning the tax office on 13 28 66.

The Commissioner said the tax office is also aiming to reduce the number of tax debts that are over two years old, and giving a greater priority to outstanding Superannuation Guarantee charge debts.

The new calendar year is already well under way. While SMEs are facing pressures on the costs front (including interest rates and possibly wages), they need to ensure they keep their tax compliance sheet “clean”.

At the same time, the new Federal Government is promising change, so the year ahead means SMEs need to keep a close eye on what comes out of Canberra. I’ll do my best to keep you on the ball.

Terry Hayes is the senior tax writer at Thomson Legal & Regulatory , a leading Australian provider of tax, accounting and legal information solutions.

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