FEDERAL BUDGET 2011: PAYG tax reprieve no big relief for small business, experts say

Business experts are disappointed over the Government’s new initiative to temporarily reduce the amount charged to SMEs in quarterly PAYG tax installments, saying it is only a minor initiative that could have been expanded.

In its budget last night the Government announced businesses will be given temporary reprieve in their quarterly PAYG statements, saying the GDP multiplier for this year will only be set at 4%. While this is an increase from the 2% rate set during the past two years, the rate had been set to jump to 8% this year.

The return to an 8% level will now occur next year.

The Government expects the temporary reprieve, which will initially cost $700 million, to be revenue neutral over the next two years.

CPA Australia spokesman Paul Drum says the initiative is an extension of the relief granted to SMEs during the financial crisis, but he is disappointed that it is essentially the smallest piece of new relief for SMEs – everything else was announced in the Henry Tax Review last year.

“The spin over all this is that it’s about providing some cashflow relief, and we all know how important that is,” he says.

“But this is a minor initiative, it’s not major at all, and it’s not enduring. And in fact with the GDP rate lifting over the next few years, many businesses will end up paying more next year.”

In particular, Russell Zimmerman of the Australian Retailers’ Association says some businesses may not benefit from the move at all.

“Changes to quarterly PAYG installments will mean little for retailers who mostly lodge PAYG monthly,” he says.

“It also sounds good, but my understanding is that it only ends up being a few dollars a week for some businesses.”

Drum disputes that, saying most businesses with revenue under $2 million will be using quarterly statements.

“You’ve got to have pretty healthy revenue to be going on monthly statements. There are some businesses compelled to launch monthly but they would be slightly bigger.”

Nevertheless, both experts say more could have been done for small business.

“If you’re a small business and looking for some hand outs or incentives, then from 2011 you’re going to be sorely disappointed. There’s nothing new, except for this new measure and it’s not going to set the world on fire,” Drum says.