Government comes under fire for “accounting trick” of monthly company tax payments: How it will impact your business

The Federal Government’s announcement yesterday of a move to monthly company tax payments to shift $8.3 billion into the budget has been criticised as an accounting trick and mere timing difference that will cost business.

Tax experts and industry bodies say what is essentially balance sheet juggling by the government will severely impact the cashflow of business.

The revenue-raising measure was introduced as part of the government’s Mid-Year Economic and Fiscal Outlook 2012-13 and will be phased in over three years starting on January 1, 2014 for companies with turnover of $1 billion or more, from January 15, 2015 for companies with a turnover of $100 million or more and from January 1, 2016 for those companies with a turnover of $20 million or more.

How payments will shift

Gavan Ord, business policy advisor at CPA Australia, told SmartCompany the monthly company tax payments the $8.3 billion in revenue-raising came from moving 14 months of tax payments into 12 months.

“The Opposition is talking about this as an accounting trick,” he says.

“The $8.3 billion comes from bringing forward payments from one financial year into the other.

“That’s where the money actually comes from; this is really just a timing thing.”

Ord says under the current system company tax payments are due quarterly so a payment for the end of the June quarter for company tax for April, May and June is due on July 28.

Under the new system, company tax for April will be due on May 28 and company tax for May on June 28, so two months are brought forward into the current financial year.

The impact on business

He says businesses with seasonal fluctuations in cashflow will be particularly hard hit by the change.

“For some business like retail, where it is cyclical, the impact will be quite large and if a lot of sales happen around Christmas there are issues there,” he says.

“They may have to borrow to pay tax bills during some of their down months.”

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