Jim Chalmers sets sights on tax red tape, but will small businesses really get a break?

Small business owners across the country could soon spend a little less time tearing their hair out over the tax system, with Treasurer Jim Chalmers announcing a fresh push to cut red tape.

The government has asked the Board of Taxation to dig into the tangle of rules and find ways to “responsibly reduce unnecessary compliance burdens” That’s bureaucrat-speak for making life a bit easier for the millions of Aussies who’d rather run their business than wrestle with a Business Activity Statement.

“The Government is looking at new ways to cut red tape in the tax system to ease the compliance burden on businesses and make our economy more productive,” Chalmers said.

The review will see the Board consult with businesses and the broader community on what tax laws and processes are causing the most grief. The Treasurer wants the changes to be “substantial, material and measurable,” not just tinkering around the edges.

A new Board of Taxation chair to lead the charge

To help drive the process, Andrew Mills has been appointed acting Chair of the Board of Taxation from 1 October. Mills has more than 40 years under his belt in senior roles across accounting, law, government and academia, so he’s no stranger to the thorny world of tax.

He replaces Dr Julianne Jaques KC, who finishes her term after nearly a decade of service. Jaques has overseen reviews ranging from GST on low-value imports to digital assets. No small feat given how quickly those areas have been changing.

Accountants cheer the move – with a few caveats

While Canberra’s promising less red tape, accountants are quick to remind the government where small businesses really need relief. CPA Australia says the review is a golden opportunity to finally fix long-standing headaches that cost small businesses time and money.

Jenny Wong, CPA Australia’s Tax Lead, is urging the Board to focus on “practical reforms that will deliver immediate benefits”.

“Simplifying BAS reporting and expanding simplified trading stock rules are some steps that would cut compliance costs and free up business owners to focus on running their business,” Wong said.

And then there’s the dreaded FBT (fringe benefits tax), which Wong says is crying out for reform.

“Small businesses should not face the same compliance load as large corporates, yet many currently spend more on FBT record-keeping than on their actual liability. We encourage the government to follow the New Zealand example and consult on a review of FBT to make it less complex and more targeted,” she said.

Wong also wants the government to sort out long-standing quirks in GST law that have “frustrated businesses and advisers for decades”.

“Cutting tax red tape must mean simplifying what’s broken, not adding new layers of complexity.”

The GST question

Of course, no conversation about tax reform in Australia ever ends without mentioning the GST. Wong welcomed the Productivity Commission’s five-yearly review of how GST is carved up between the states but warned against letting the state-versus-state bunfight distract from bigger priorities.

“Reform of the GST is central to resolving the structural weaknesses in Australia’s tax system,” she said. “Most tax specialists believe that increasing the GST is the key to broadening the overall tax base and reducing the reliance on personal income tax, which would put more money in people’s pockets and ultimately generate more revenue to help drive economic growth.”

How will small businesses be impacted?

At this stage, it’s a waiting game. The Board of Taxation will be consulting widely before handing advice back to government, and that’s when we’ll see whether Canberra is serious about cutting through the knot of compliance.

Still, there’s reason for optimism. The Treasurer has acknowledged the burden, and the accountants are ready with practical solutions. If even a few of them make it through the political wringer, small business owners could save hours of paperwork and put more energy into running and growing their businesses.

For now, it’s a case of watch this space. But if the Treasurer and his team can deliver on their promise, it might just be the rare kind of tax reform small business owners can actually celebrate.

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