Regulatory Roundup – June 2014

Rethink your business tax return strategy with the “debt levy”

The almost definite passage of the government’s “debt levy” will directly hit many small businesses, particularly those that are unincorporated – which comprise up to 70% of small businesses – according to tax experts. The proposed new tax would kick in at an annual income threshold of $180,000 but the impact of an increased tax for small businesses represents something of a double whammy for owners as many of them are unincorporated, not subject to the planned reduced company tax rate and still exposed to personal tax rates – and subsequently, the debt levy. Taxpayers Australia’s head of tax, Mark Chapman, advised small businesses to delay paying bills as long as possible and move as many tax deductions as possible into the new financial year in order to maximise relief at the new higher tax rates.

Businesses welcome Small Business Ombudsman

Businesses have applauded the transformation of the Australian Small Business Commissioner into a Small Business and Family Enterprise Ombudsman. The Ombudsman will mainly function as a:

  • mediator for small business dispute resolution
  • national advocate for small business and family enterprises
  • contributor to the development of small business-friendly laws and regulations, and
  • single entry-point agency through which national assistance and information regarding small business can be accessed.

Penalty rate relief for restaurant and café owners

The Fair Work Commission’s decision to reduce penalty rates by 25% on Sundays for casual employees has been welcomed by the hospitality sector. Restaurant and Catering Australia (R&CA) chief executive John Hart said he was pleased to hear the decision to reduce casual loadings on Sundays from 175% to 150% will come into effect on July 1, 2014. “This will provide labour cost relief for restaurant and café operators currently trading on Sundays. Businesses that are currently shut on Sundays may re-consider – returning convenience to Sunday diners.”

Tax Office homes in on businesses in the cash and hidden economy

The Tax Office has warned errant businesses and individuals that its data-matching program is becoming increasingly sophisticated, as it collects information from banks, government agencies and industry suppliers on purchases of major items such as cars and real estate. “We compare this information with the income and expenditure that businesses and individuals have reported to us. These comparisons allow us to identify businesses that are potentially skimming some or all of their cash takings, running part of their business off the books, or in other ways are not reporting all their income,” the Tax Office said.

Regulatory and legislative changes number one business concern

Regulatory and legislative changes have moved up the list of business worries to become the number one risk concern for Australian businesses, an Aon survey has found. According to the survey, recent legislative changes have come with more restrictive working conditions, additional fines and penalties, and significant costs associated with becoming compliant. Regulatory and legislative changes were the number one risk concern for businesses in financial and professional services, healthcare and utilities. Other top concerns for businesses overall were local economic conditions, people risk, increasing competition as well as brand and image.

Common BAS errors revealed

The Tax Office said businesses could avoid some common errors on business activity statements (BAS) by:

  • reviewing activity statements before lodging
  • checking that all tax invoices are valid
  • checking that expenses and sales are for the current tax period, and
  • checking that invoices are only entered once.

Could cutting your business’s tax bill simply be a matter of timing?

Online accounting software provider Xero said many of Australia’s two million small businesses could lower their tax bills by changing accounting methods from the cash method to accrual, the latter of which recognises income as bills are issued and expenses as invoices are received. Xero’s managing director Chris Ridd said this could, if timed correctly with the end of the financial year, help minimise income and maximise expenses in order to reduce the amount of tax liability business owners face.

ACCC takes action against businesses that made false carbon tax representations

The Australian Competition and Consumer Commission’s (ACCC) proceedings against Actrol Parts should serve as a cautionary tale to businesses overinflating the effect of the carbon tax on their prices. ACCC contended that the refrigerant gas wholesaler made false or misleading representations and engaged in misleading or deceptive conduct when it implemented significant increases in the price of certain types of hyrdofluorocarbon (HFC) refrigerant gas from July 1, 2012. ACCC chairman Rod Sims said he believes Actrol was simply amassing a stockpile of HFC refrigerant gas prior to the introduction of the carbon tax, and that the price increases were implemented to increase margins and achieve a significant one-off benefit to earnings.

Reform of private equity and venture capital system could help more SMEs

The Australian Private Equity and Venture Capital Association (AVCAL) has called for a reform of venture capital (VC) and private equity (PE) so that it plays a broader role in funding more Australian businesses. In its submission to the Financial System Inquiry, AVCAL drew upon research that said capital investments by PE funds support more than 500,000 jobs and contribute more than 4% to Australia’s economy, while businesses that have received VC backing account for 10% of all business research and development (R&D) expenditure in Australia. However, VC and PE funds have invested in over 350 Australian businesses – less than 2% of the total investable pool of up to 30,000 businesses – leaving potential for further investments.