Small business keeps the taxman employed

Offers of help to SMEs from the taxman are undoubtedly genuine. After all, small business is the source of about two thirds of collectable tax debt. By TERRY HAYES of Thomson Legal & Regulatory.

By Terry Hayes

The Commissioner of Taxation has recently announced that the tax office is “refreshing” its approach to small business to help it comply with the tax laws.

The tax office has created a “Small Business Assistance Program” which it says aims to help get new businesses on the right track from the start by developing what the Tax Commissioner calls “good tax habits”.

So, the tax office is genuinely trying to help SMEs – but SMEs also help the taxman too – and not just by paying their tax; small businesses provide work for nearly 25% of those employed at the tax office (around 5000 staff).

So SMEs not only make a significant contribution to the economy in their own right – they help employ many others, both within and outside their businesses.

The tax office provides what many SMEs might find is a surprising number of useful tools to help them, such as:

• An employee/contractor decision support tool designed to make it easier for businesses to understand and comply with their tax and superannuation obligations. This tool is intended to be used by the person or business who engages and pays the worker, and is designed to help small businesses understand whether their individual workers are employees or contractors in order to comply with federal tax and superannuation obligations.
• e-Record to help small businesses keep good business records and meet their tax reporting obligations. This program can be downloaded from the tax office website.
• A new brochure entitled ‘Helping small business stay on track’, which was developed collaboratively with small business and industry groups. It provides practical guidance and tips for small business owners.
• The tax office is also developing a personalised calendar for small businesses that will remind them when their tax obligations fall due.

SMEs should take advantage of these tools where necessary, but be mindful of the need to keep their accountant or adviser “in the loop”.

While all these tools are undeniably helpful to SMEs, small business operators may not always feel comfortable in approaching the tax office themselves. In this regard, the Commissioner says that if a small business has concerns about approaching it directly, the tax office is happy to help them through their industry or local business association.

Under its Small Business Assistance Program, the tax office will be contacting new business operators offering them practical assistance with important tax basics including record keeping, completing activity statements, PAYG and super guarantee.

The assistance will be by the way of personal visits, free seminars, workshops and telephone contact. Under this program, the tax office plans to make over 8000 small business assistance visits, and 33,000 support phone calls in this financial year. According to the tax office, its business assistance visits have “no strings attached” and there is no auditing or checking during the visits.

The program is geared to provide help at various other points in the business life cycle. For example, at the stage where a business decides to take on employees, registers for GST and, in particular, if a business is having difficulties in meeting its tax and superannuation obligations.

The tax office will be calling businesses to see if they need help installing the business portal and other electronic tools and calculators and tax office products such as e-Record. For businesses having trouble getting started, the tax office promises to help them get connected.

The Commissioner has again recently singled out tax debts of small business as a major area where he is willing to help. He says if taxpayers fall behind or are having difficulties, they or their agents can contact the tax office early to advise of their situation and “we’ll work with them on a solution”.

While the offer of help is genuine, and should be seen as such, it is no doubt at least partly driven by the fact that SMEs with a turnover of less than $2 million account for about two-thirds of outstanding collectable tax debt.

Tax debt is clearly an issue for many SMEs, and has been so for many businesses for a number of years.

The message is simple enough – if an SME runs into difficulties with its tax or super debts, don’t struggle along hoping things will turn around. See your accountant or adviser and be prepared to work with the tax office to sort out a payment arrangement that will see the debts cleared.

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

For more Terry Hayes features, click here .