New stats reveal how tax eats up your time

New statistics from the Australian Taxation office have revealed that SMEs spend a whopping 3.25 days filling out tax for fringe benefits tax, business activity statements and income tax.

But tax expert Yasser El-Ansary, tax counsel from the Institute of Chartered Accountants, says the figures vastly underestimate the amount of time SMEs spend on tax compliance and says the eagerly anticipated Henry Review must address the compliance burden.

The ATO statistics shows fringe benefits tax is the biggest time eater, with the FBT form taking an average of 12.1 hours for businesses to wade through.

Business activity statements take an average of two hours a quarter (or eight hours a year) while income tax forms take 5.9 hours.

But El-Ansary says the statistics vastly underestimate the amount of time companies really need to put into their tax affairs.

“That’s not actually including the time getting things ready, preparing documents, so when you sit down to fill out the form you’re ready to go.”

“It’s fundamentally way too high for individuals and businesses to have to spend that much time managing your tax.”

He says FBT stands out as a tax that needs the most urgent attention.

“It’s probably the most paper-intensive tax that we have. The amount of paper work you have to put together and keep on file is very, very significant and that’s one of the key issues I hear from a lot of businesses.”

He is hopeful that the Henry tax review will look at ways for the FBT burden to be shifted from employers to employees, such that employers include the total amount of fringe benefits paid on an employee’s group certificate, and the employee is then required to inform the ATO of the details.

“That will go a long way to helping lift that compliance burden,” he says.

El-Ansary says the proportion of individuals who use a tax agent for their tax affairs – currently sitting at 73% – is also too high and is keen to see the Henry Review adopt the suggestion for a simple one page tax return that individuals could just sign or dispute if they wish.

The ATO’s stats show individuals spend an average of 4.9 hours on their income tax return and spend an average of $301 managing their tax affairs each year.