Labor announces GST lodgement relief for small business, but tax experts aren’t convinced

The small business community has welcomed in principle a report the government will reduce GST payment compliance for small business, but tax experts warn the announcement may not be as generous as it seems.

Labor announced this morning that beginning from July 1, 2014, over a million SMEs will have access to a new payment system which will only require one yearly report. Currently, reports are required on a quarterly basis.

The scheme comes after Labor announced yesterday small businesses will no longer be required to administer payments for the parental leave scheme. More small business-focused announcements are expected during the next few days.

In a statement, Labor said businesses with a GST turnover under $20 million will only be required to lodge their Business Activity Statement forms once a year.

“In addition, a Rudd Labor government will also consult on ways to allow more businesses to benefit from this reform by allowing refunds of GST credits throughout the year for businesses in a net GST refund position,” it said.

“This will be important for many businesses who would otherwise choose to lodge returns through the year just to get a refund.”

But some are sceptical.

Pitcher Partners partner Craig Whatman told SmartCompany this morning while the proposal is a “good start”, there are still plenty of unanswered questions.

“One thing that’s missing from the announcement is whether the annual lodgement is going to be lodged with an annual payment,” he says.

“My expectation is that it won’t be. I would expect businesses would still be required to make instalment payments throughout the year.”

Whatman also says changing the lodgement scheme from quarterly to yearly may help some businesses, but for others it will actually increase their compliance requirements.

“Given the number of entities within that band of under $20 million revenue, changing their payment liabilities will have a significant impact on cashflow. I would very much doubt they’d allow those entities to make one payment per annum.

“And to change these systems to lodge an annual return would be a significant cost to them that may not reduce their compliance.”

“If the government is going to do this,” he says, “it should be optional”.

Gavan Ord, business policy advisor at CPA Australia, told SmartCompany while it’s difficult to comment on the proposal at such an early stage, it appears to be more of an “incremental change” and said it’s unlikely every business will take the government up on its offer.

“Businesses, particularly those with turnovers of just over $2 million, may well take advantage of the change. However, it is unlikely that businesses with turnover closer to $20 million will take up the option.

“Such businesses will continue to want to lodge their BAS quarterly to better manage their cashflow and compliance obligations.”

Even if businesses take up an annual option, Ord says, “they should still be tracking how their business is performing as it may be advantageous for them to lodge quarterly BASs”.