‘Houses on the line’: Tax disputes to become easier for SMEs, but is earlier intervention needed?

Small business advocates and accountants have welcomed a move by the Morrison government to establish a small business concierge service to help SMEs resolve disputes with the tax office.

The policy, announced by Prime Minister Scott Morrison this week, will establish an advice and support desk within Australian Small Business and Family Enterprise Ombudsman (ASBFEO) to assist with Australian Taxation Office (ATO) disputes.

Signalled by Assistant Treasurer Stuart Robert last month, it is the latest SME-focused announcement made by the federal government in recent months and comes after allegations of heavy-handed ATO tactics were made public in an ABC Four Corners investigation earlier this year.

A small business taxation division will also be created within the Administrative Appeals Tribunal (AAT), carrying a $500 application fee and a guarantee decisions will be made within 28 days.

The new desk within the AAT promises to simplify the dispute process for small business, with the ATO to pay legal expenses for both parties in some cases.

Houses on the line

Australian small business and family enterprise ombudsman Kate Carnell, who highlighted ATO dispute complaints at an estimates hearing last month, said her office was well placed to handle an influx of concerned business owners.

“This new proposal is critical for small businesses as, more often than not, their houses are on the line,” she said in a statement.

“The financial impacts of a dispute through the courts over a long period of time is devastating and it doesn’t take long for a small business to run out of money.”

Small business debt accounted for the majority of money owed to the ATO in the 2017-18 financial year, with more than $12 billion outstanding to the end of last financial year.

Tony Greco, general manager of technical policy at the Institute of Public Accountants, believes many businesses which could dispute their tax bills neglect doing so because of associated costs.

“A lot of small businesses just give up, saying its a cost of doing business,” he told SmartCompany last month.

There were 173 small business settlements with the ATO last financial year, which together delivered $30.7 million in savings for SMEs.

In contrast, there were 287 claims from “privately owned and wealthy groups”, who managed to claw back 60% of their tax bill, saving $274 million.

Earlier intervention needed?

Accountant Lisa Greig of Perigee Advisers says while efforts to help SMEs with ATO disputes are helpful, more intervention is needed earlier on in the dispute process.

“By the time it potentially gets to the AAT it’s already fairly escalated,” she tells SmartCompany.

“I’d want more help earlier on, with knowing when to escalate.”

Council of Small Business of Australia (COSBOA) chief executive Peter Strong welcomed the reforms, saying he hopes whoever fills the role at ASBFEO will be proactive about getting ahead of issues.

“The ATO is world class, but it doesn’t mean there are no mistakes,” he tells SmartCompany.

“I’m hoping whoever it is [at ASBFEO] will be very proactive and have a look at garnishees and things like that.

“If they can identify a new way of seeing mistakes before they’re made that would be useful,” he says.

Paul Drum, general manager of external affairs at CPA Australia, said the service will need to work closely with existing legal and tax advisers.

“It seems a constructive proposal, but it is not accompanied by very much detail,” he tells SmartCompany.

“We look forward to seeing the actual detail in due course.

“For such a service to be successful, it will need to work closely with the small business’s legal and tax advisers to ensure the small business receives holistic advice before a decision on taking legal action through the court system is made,” he says.

In a statement, the ATO’s deputy commissioner for small business, Deborah Jenkins, welcomed the policy.

“We already work closely with ABSFEO on how we can best support small businesses to meet their tax and super obligations,” she said.

“The additional service will complement our existing range of services aimed at earlier and fair resolution of disputes with small businesses including our in-house facilitation service, Dispute Assist, ATO Test Case Litigation and Fast Intensive Triage.”

Tax policy rounds out SME focus

The policy is just the latest small business-focused announcement by the Morrison government, as it looks to make the small end of town a big part of its policy agenda heading into the election next year.

It comes after the fast-tracking of SME tax cuts, a $2 billion business securitisation fund and $300 million in red tape reduction through an increase in ASIC reporting thresholds.

Labor has said it will support most of the coalition’s already announced SME policies and has previously committed to introducing a second ATO commissioner to deal with small business disputes.

Labor also wants to open 10 tax clinics across the country that will provide free legal advice to SMEs that have problems with the tax office.

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