Regulatory roundup – June 2013

ATO warns business: Don’t claim loss carry-back…yet

Business owners are being warned that a back-log of bills sitting in parliamentary in-trays means that one of the government’s long-promised business tax breaks, the $700 million loss carry-back legislation, will most likely not be passed and made available before the looming tax time. Implementation of the measure has been simmering away since it was first announced in the 2012-13 budget, but the legislation has been languishing at the bill stage. Under the measure, businesses would be able to carry back up to $1 million worth of losses to get a refund of tax paid on an immediately previous year’s profits.

ATO to data match 457 visa holders in government crackdown

Business groups have hit out at the government’s renewed crackdown on businesses that employ 457 visa holders, with the 2013-14 Federal Budget almost doubling the application fee for 457 visas from $455 to $900 come July 1, 2013, and allocating $3.4 million over the next four years to the Fair Work Ombudsman to monitor and enforce employer activity among 457 visa holders. ACCI chief executive Peter Anderson said the government’s claims of 457 visa infringement are “inflammatory”, while AIG head Innes Willox said the fact that there are few prosecutions or sanctions against employers suggest there are few cases where the 457 program is abused.

Business sector fears Medicare levy hike may hurt consumer confidence

The federal government’s announcement that the Medicare levy will rise by 0.5% in order to fund its National Disability Insurance Scheme (NDIS) was met with a barrage of criticism from prominent business groups. The proposed hike means taxpayers earning $30,000 a year will pay an extra 41 cents per day, while those earning $70,000 a year will pay an extra 96 cents per day. Those earning $110,000 will pay an extra $1.51 per day. Executive director of the Australian Retailers’ Association, Russell Zimmerman, called on the government to reduce taxes in the aftermath of the Medicare levy hike. Similarly, chief economist of the Victorian Employers Chamber of Commerce and Industry, Steve Wojtkiw, said the difficult economic environment means it is an inopportune time to impose new taxes.

Small businesses reveal election priorities

Small businesses rank the company tax rate reduction, personal income tax reductions, and the removal of the carbon tax as the top three tax reform priorities for the next Australian government, according to a survey conducted by the Australian Chamber of Commerce and Industry (ACCI). The survey showed that other than the top three concerns voiced above, small businesses also want payroll tax reductions, other state reforms – concerning land tax, stamp duties, and insurance levies for instance – as well as fringe benefits tax reform.

Most businesses want a Coalition government

More than a third of businesses view a Coalition victory as more favourable for their operations, with only 7% of businesses indicating that a Labor Party election win would be more beneficial, according to Dun & Bradstreet’s latest National Business Expectations Survey. No businesses in the manufacturing and wholesale industries favoured a Labor win, while support for the Coalition was strongest in the construction, retail and wholesale industries at 47%, 44% and 42% respectively. But the survey also showed that the outcome of the election does not matter to 37% of businesses, and 15% said they were either unsure or did not know.

ATO tax break may spell trouble for business’s credit rating

Small businesses that utilised the ATO’s interest-free tax repayment arrangement during the height of the global financial crisis may have a negative credit rating and encounter difficulties in obtaining unsecured finance funding, according to a business finance broker. The ATO interest-free tax arrangement helped viable businesses that had trouble meeting their tax payment obligations, and allowed them to enter into a payment arrangement to progressively reduce their outstanding liability. However, businesses who used these arrangements were warned that financial institutions and banks take a very dim view of ATO payment arrangements as it points to difficulty in repaying priority debts, cash flow difficulties and a poorly run business. As a result, all applications for unsecured equipment funding carrying an ATO arrangement will typically be met with refusal.

Australia loses out to US and Canada in employment costs

Australian businesses pay on average around 17.5% on-costs on top of an employee’s gross wage. This compares to 8.2% and 7.0% in the US and Canada respectively. New global research showed that “other taxes” for Australian businesses with employees in the $US75,000 gross wage bracket are around 10% higher than the US and Canada. Although the researcher said the fact that Australian businesses pay their employees 9% compulsory superannuation contributions is admirable, it said the system renders Australian businesses uncompetitive.

Small businesses face a multi-billion dollar cash flow headache

Small businesses waste a total of 16.5 million hours each year – or on average two hours each per month – chasing up small overdue debts, according to a Commonwealth Bank survey of 750 small businesses. The survey found that the average small business is currently owed $11,588 in overdue debts – almost two thirds of all payments owed by customers – meaning small businesses could be out-of-pocket by as much as $10.4 billion nationwide. Meanwhile, cash flow issues have caused 47% of businesses to pay invoices late, and 22% to pay staff wages late.

Less businesses trading at a loss, but more insolvencies

The number of companies operating in Australia at a loss has decreased 1% from 273,690 to 269,215 businesses, according to the latest figures from the ATO. However, the improved trading figures also coincide with a rise in insolvency numbers for the same period. This last trend has continued, with insolvency numbers recorded by ASIC growing. Liquidation firms concluded however that the figures are not necessarily contradictory, especially as they tend to lag from when the slow trading conditions first started. Businesses in the 2010-11 year, for instance, may have started feeling financial strain as early as 2007 or 2008, when the global financial crisis first started.

Record number of businesses for sale reflects difficult trading conditions

The level of businesses advertised for sale in the March quarter stayed near its recent record level, according to the BizExchange Index of Australian Private Business Values. BizExchange chairman David Bird said the softening in prices was on the back of the negative impact of legislation which he contends has reduced the flexibility of working hours and other conditions, as well as the downturn in the mining and construction industries – causing a substantial flow-on effect on service industries which are heavily project-related.