Small business owners should receive tax concessions for heavy burdens of compliance

In a pre-budget submission to the Government, the Institute of Public Accountants (IPA) has recommended that small businesses receive tax concessions to compensate them for the heavy burdens of compliance demands.

IPA CEO Andrew Conway said the proposal would operate on a similar basis to the recently abolished Entrepreneurs Tax Offset. “Our proposal for a small business tax offset can be funded through the redistribution of a host of existing small business tax concessions.  For example, reduce the generous Capital Gains Tax discounts that are available on selling a business, as recommended by the Henry Tax Review,” he said.

The level of taxation compliance complexity facing small business has increased substantially over the last few decades. With the introduction and development of Fringe Benefits Tax (FBT), CGT, Goods and Services Tax (GST), the paid parental leave scheme and compulsory superannuation, our taxation system has become excessively onerous and more than 95% of businesses currently engage a tax practitioner, said the submission.

It suggested that the removal of a host of existing small business tax concessions would flatten the tax rate applying to small business income and fund the proposal. These would include:

• Rationalising and streamlining the CGT concessions recommended by the Henry Review.
• Abolition of the current option of small business to claim up to $5,000 as an immediate deduction for the purchase of motor vehicles.
• A review and rationalisation of other small business income tax concessions.
• A review of existing FBT concessions to enhance efficiency and equity. The use of uncapped FBT exemptions for restaurant meals and the hire of entertainment facilities for private purposes by relatively high income professions costing revenue hundreds of millions of dollars and goes well in excess of original policy intent, said the proposal.

 “There is evidence to support the proposition that the majority of small businesses would prefer a lower tax rate and a simpler system than a plethora of complex tax concessions which they may not be able to fully access,” said Conway.