Compliance regime for small business faces revolutionary change

The Board of Taxation has released a report titled Review of Tax Impediments Facing Small Business, which contains its recommendations to government on what it deems to be the main impediments to small business owners in Australia. The board is a body that was set up to look at various aspects of our tax system and make recommendations based on the board’s expertise.

The recommendations in its latest report are based on a stated aim of reducing the cost of compliance and to “focus on options for the simplification and deregulation” of the small business regime. In particular, it was charged with looking closely at aspects of the present tax system that unreasonably impede the goals of a broad cross section of businesses.

The report identifies a number of initiatives that the Board of Taxation believes can be implemented relatively quickly by the Tax Office, which it says the Tax Office has already started implementing aspects that it agrees with. Other recommendations would require legislative change and therefore will need to go through the required processes if they are adopted.

Not all recommendations are listed below — see Appendix A of the report (download it here)  for the full list. However the main takeaway points that will affect small businesses are the following.

Small business entity test

Based on Australia’s business population data, the Board of Taxation has recommended that the small business turnover threshold be increased to at least $3 million (from its present $2 million turnover). It also recommended investigation of the feasibility of further increasing the threshold to $5 million.

CGT concessions

Complexity and cost of compliance were the two main concerns raised about the small business CGT concessions. The board identified some options to improve the regime, which includes the option of raising the turnover threshold and considering a more “tapered” approach to the concessions. However it considers that a comprehensive fundamental review is warranted.

FBT

One suggestion to note is its recommendation to raise the “minor and infrequent” FBT threshold from $300 “to at least $500”. It has also recommended that that there be an investigation of the possibility of aligning the FBT year to the income tax year. The board notes however that transitional implications and reporting timeframes would need to be considered.

Activity statements

One (possibly) welcome change that the board mentions is the possibility of reviewing whether small businesses could simplify reporting obligations so that an annual combined income tax return and business activity statement, based on the same data, could be lodged once annually after the end of the financial year.

Personal services income tests

It also says that while the Tax Office has developed a decision tool to work through the personal services income (PSI) tests, further work needs to be directed to this tool so that clarification is provided to the user about what tax outcomes will emerge from the test results. It goes further by recommending that where the PSI tool is used in good faith, this should provide protection from the imposition of penalties where the user relies on the outcome.

Super guarantee charge

The present penalty regime faced by employers regarding the super guarantee charge (SGC) is described by the board as being “unnecessarily harsh”, and implemented with “often disproportionate outcomes”. It therefore recommends that a broad discretionary power be implemented where the Tax Office can remit certain SGC components. A review and/or objection process would be required.

Murray review (Financial System Inquiry) report recommendations

The government initiated the Financial System Inquiry (also known as the Murray review) was charged with examining how the financial system could be positioned to best meet Australia’s evolving needs and support Australia’s economic growth.

The FSI has submitted its final report and made 44 recommendations relating to the Australian financial system.  It looked at any distortions in the marketplace and how competition could be improved. The inquiry’s recommendations included:

• Remove the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements by superannuation funds.
• Require superannuation trustees to pre-select a comprehensive income product for members’ retirement. The member can elect to take their benefits in another way.
• Provide all employees with the ability to choose the fund into which their Superannuation Guarantee contributions are paid.
• Raise the competency of financial advice providers and introduce an enhanced register of advisers.
• Create a new Financial Regulator Assessment Board to advise Government annually on how financial regulators have implemented their mandates.
• Rename “general advice” and require advisers and mortgage brokers to disclose ownership structures.

TAX ISSUES: Tax issues referred by the Inquiry for consideration to the tax white paper review to be undertaken in 2015:

• In relation to the taxation of contributions and investment earnings in superannuation, the white paper should consider aligning the earnings tax rate across the accumulation and retirement phases.
• Tax concessions in the superannuation system are not well targeted to achieve provision of retirement incomes.
• The relatively unfavourable tax treatment of deposits and fixed-income securities makes them less attractive as forms of saving and increases the cost of this type of funding.
• Capital gains tax concessions for assets held longer than a year provide incentives to invest in assets for which anticipated capital gains are a larger component of returns. Reducing these concessions would lead to a more efficient allocation of funding in the economy.

• Questions the need to retain the dividend imputation. Dividend imputation can distort the allocation of funding, a lower company tax rate would likely reduce such distortions.
• The GST is not levied on most financial services. This may distort the financial system and make it larger than it otherwise would be.

The final report indicated that further growth in superannuation funds’ direct borrowing would, over time, increase risk in the financial system. The report argues that the prohibition of LRBAs will help to “prevent the unnecessary build-up of risk in the superannuation system and the financial system more broadly”.

Scam that targets business payments hits Australia

Businesses are being warned by the government website SCAMwatch, which is run by the Australian Competition and Consumer Commission (ACCC), that an invoice email scam is doing the rounds.

The scam, operating in countries in the northern hemisphere until recently, has now appeared south of the equator. SCAMwatch says the ploy involves scammers pretending to be legitimate suppliers advising businesses of changes to payment arrangements, and says that the scam may not be detected until the business starts to get complaints from suppliers that invoices have not been paid.

Businesses trading overseas, particularly dealing with companies in Asia, are at higher risk of being ripped off by these scams.

How these scams work

Scammers hack into vendor and/or supplier email accounts and obtain information such as customer lists, bank details and previous invoices. Your business receives an email, supposedly from a vendor, requesting a wire transfer to a new or different bank account.

The scammers either disguise their email address or create a new address that looks nearly identical. The emails may be spoofed by adding, removing, or subtly changing characters in the email address which makes it difficult to identify the scammer’s email from a legitimate address.

The email may look to be from a genuine supplier and often copy a business’s logo and message format. It may also contain links to websites that are convincing fakes of the real company’s homepage or links to the real homepage itself.

The scam email requests a change to usual billing arrangements and asks you to transfer money to a different account, usually by wire transfer.

Protect yourself

SCAMwatch says there are steps to take to protect your business and make it “fraud-free”, and says an effective management procedures can go a long way towards preventing scams. Steps can include making sure your business:

• has a clearly defined process for verifying and paying accounts and invoices
• considers a multi-person approval process for transactions over a certain dollar threshold
• ensures staff are aware of this scam and understand how it works so they can identify it, avoid it and report it
• double checks email addresses — scammers can create a new account that is very close to the real one; if you look closely you can usually spot the fake
• does not seek verification via email — you may be simply responding to the scammer’s email or scammers may have the capacity to intercept the email. If you think a request is suspicious, telephone the business to seek verification of the email’s authenticity
• does not call any telephone number listed in the email; instead, use contact details that you already have on file for the business, or that you have sourced independently
• does not pay, give out or clarify any information about your business until you have looked into the matter further

• checks IT systems for viruses or malware — always keep your computer security up-to-date with anti-virus and anti-spyware software and a good firewall.

Report any scams

If you’ve been scammed there are steps you can take to minimise the damage and prevent further loss. Follow this checklist from SCAMwatch to protect yourself. You can report scams to the ACCC via the SCAMwatch report a scam page or by calling 1300 795 995.

You should also spread the word to your colleagues.

Five apps that could revolutionise how you do business

The technology and working life website Lifehacker says mobile devices have evolved to be used for more than just calling, email, social media and selfies. Lifehacker says there are some very handy apps that can allow you to operate your business on the go – or completely change the way you do things. Here are five of Lifehacker’s favourites.

1. Deputy

Deputy is an Aussie-made answer for anyone managing casual, part time or shift workers. It handles rostering, can show you who might be available at short notice, acts as a time sheet (employees can tap on or off) and manages payroll. It also acts as an internal communication and employee performance tool.

Download:iOS, Android

2. Invoice2go

As its name indicates, this app creates invoices on the go. There are templates to choose from for estimates and purchase orders as well. Best of all it syncs across your devices, creating charts and reports automatically to show you how your business is performing — and who owes you money — at a glance. Lifehacker deems that this app cuts down a lot of time for getting invoices out, which means you can be paid faster.

Download:iOS, Android

3. Evernote

A note taking tool with a clean interface, tagging tools and searchable text which you can save directly to the cloud which you can access from any device. It saves websites, typed notes, PDFs, images, handwriting, itineraries, schedules, lists, contacts — if you need to remember it, this is one very handy storage option.

Download: iOS, Android

4. Timely

Operating a business that relies on appointments can sometimes be tricky to manage. Timely syncs with your other calendars (iCal, Google Calendar and Outlook) and then books and tracks appointments, records, histories and personal notes of clients. It helps manage your client database and can send out SMS reminders too.

Download: iOS

5. Vend

You might have seen this app or something similar down at your local coffee haunt. You no longer have to fork out, or sacrifice space, for a big cash register. Vend turns your iPad into a cash register. Lifehacker says it is fast and easy to use, works for all payment methods, and will even run a customer loyalty program.

Download: iOS

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