Taxman can help in tough times

Tax compliance can get a little lost in the drive to simply survive, but SMEs can’t afford to let that happen. The taxman still wants to be paid, but is not unsympathetic to the realities. By TERRY HAYES

By Terry Hayes

Tax compliance can get a little lost in the drive to simply survive, but SMEs can’t afford to let that happen. The taxman still wants to be paid, but is not unsympathetic to the realities.

In a recent column I suggested that in these tough times some businesses may be tempted to delay some payments such as tax payments (such as pay-as-you-go withholding payments) to the tax office.

The tax office understands this and is keen to help SMEs ensure it doesn’t happen.

The Tax Commissioner Michael D’Ascenzo says that the tax office, like many large organisations, regularly runs its own “environment scan” to identify issues that might affect its future operations. Not paying tax on time certainly rates as a prominent issue in that scan!

He said the tax office’s current scan reflects many issues that are undoubtedly on the radar of many businesses as well – the global economic slowdown, its accompanying credit squeeze and inflationary pressures.

For the taxman, these issues have potential impact on corporate distress, with implications for increased tax debt cases and tax compliance behaviour. So the tax office is alert to the pressures that SMEs are under and is certainly attuned to possible reactions to those pressures that may affect tax compliance.

When he released the tax office’s 2008-09 compliance program recently, D’Ascenzo said the tax office intends to improve its assistance program to support small businesses with a particular emphasis on helping businesses get started and stay on track. Staying on track in the current business climate is certainly key for many SMEs.

When a business suffers financial stress, the tax office considers that early intervention is essential to keep it on track with its tax obligations. To this end, its small business assistance program aims to achieve this by providing practical and timely support.

The program gives free access to practical, confidential support in understanding tax obligations. This support includes seminars, workshops and on-site visits – see details on the tax office website. The tax office also offers a range of seminars and workshops on tax basics, record keeping and tax essentials for employers.

The tax office recently hosted a small business workshop involving business advisory groups and others, including a representative from the Beyondblue organisation. D’Ascenzo says that representative “reminded us all that micro and small businesses are also people”.

D’Ascenzo acknowledged that people affected by environmental, social and personal factors beyond their control can find themselves in financial difficulty and “often the last thing on their minds is taxation compliance”.

As a result, the tax office says it is working to ensure that small businesses adopt good tax disciplines and stay on top of their obligations. In the last year alone, the tax office says its small business assistance program helped more than 73,000 businesses.

At the same time, the tax office is increasing its focus on income tax compliance for SMEs generally, and particularly for those with turnovers between $100 million and $250 million. That clearly targets very large SMEs, but it should be noted that the taxman has broadened the definition of the SME segment.

Previously, the SME segment covered businesses with an annual turnover of $2 million to $100 million. In response to more complex business dealings and international transactions in this sub-segment, the tax office has now expanded this to include businesses with an annual turnover of $2 million to $250 million.

D’Ascenzo says that, over the next four years, the tax office will risk-assess all businesses in this sub-segment. It will follow this up with more reviews and audits where appropriate and will commence a pilot of 50 risk assessments.

The taxman intends to check to ensure that all entities associated with businesses in this sub-segment are up to date with their business activity statement and income tax lodgment obligations.

These tough economic times are a very real challenge for all SMEs. Tax compliance can get a little lost in the drive to simply survive, but SMEs can’t afford to let that happen. The tax office is ready and willing to help, so take them up on the offer if your tax situation looks like becoming precarious. Of course, consult your adviser or accountant too.

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