Regulatory Roundup (September 2012)
Will new loss carry-back scheme rules mean less can claim?
Proposed rules contained in a recently released discussion paper about the new loss carry-back scheme could potentially restrict more businesses from using the benefit. The discussion paper outlines plans to prevent “loss trafficking”, which would stop directors from buying companies that already have losses in order to use the carry-back rules to exploit the scheme. These proposed rules have emerged as a problem because losses are only able to be carried forward where there is continuous ownership and the business owner carries on the same business. However, to stay successful and viable, businesses are often required to innovate and change course. As a result, the cost of trying to access the carry-back scheme could be prohibitive for small business.
Cuts to R&D tax incentive could fund a company tax rate reduction
The Business Tax Working Group has made recommendations on how the government can fund a company tax cut by finding savings in three areas – interest deductibility, capital allowances and the treatment of capital expenditures – although it was the potential cutting back of the R&D Tax Incentive that has sparked most criticism. Chief executive of the Australian Industry Group (AIG) Innes Wilcox opposed the proposal because research indicates the “incentive plays a very important role in raising the overall level of business R&D”.
ATO reveals most common errors when applying for CGT concessions
The Tax Office says many small businesses have incorrectly applied some aspects of the tests for eligibility for the small business capital gains tax (CGT) concessions. It says the two most common errors when working out eligibility are:
- omission of relevant entities that are connected with the business, and entities that are affiliates, for the purposes of calculating the small business entity turnover test or the maximum net asset value test, and
- incorrect calculation of the small business participation percentage when working out who is the business’s significant individual and CGT concession stakeholder.
Small business on the ATO’s radar
In an address at the NAB National Business Summit, Tax Commissioner Michael D’Ascenzo said the Tax Office has turned its spotlight on to the small business sector. More than 70,000 wealthy Australians with net assets of more than $5 million each control over 400,000 entities – many of which are small businesses. Among the earmarked targets in the 2012-13 Tax Office small business compliance crackdown are: businesses that incorrectly claim fuel tax credits; goods and services tax (GST) refund integrity; GST evasion; and tax avoidance schemes such as Division 7a schemes, labour hire arrangements, research and development (R&D) abuse and foreign trust arrangements.
Withholding refunds may become more common
Changes to the tax law now allow the Tax Office to withhold GST tax refunds pending “integrity checks”. The action will generally be triggered should the Tax Office have reasonable grounds to suspect inaccuracy or an inherent complexity in the claims that require further investigation. As many business owners bank on getting a GST refund on their activity statements, a delay can be either inconvenient or downright unwelcome. As a result, recent changes to the discretionary powers of the Commissioner of Taxation should not only be noted but factored into a business owner’s short-term outlook.
Independent MP weighs in on penalty rate debate
Independent MP Nick Xenophon will introduce a Bill to the senate in an effort to prevent small businesses from closing on weekends because of high penalty rates. Under Xenophon’s Bill, penalty rates would still be payable – but only where an employee has worked more than 38 hours in a seven day period or worked more than 10 hours each day. The Bill would only exempt businesses which employ fewer than 20 full-time employees from paying high penalty rates.
Untimely delays to R&D Tax Incentive
Small businesses are experiencing month-and-a-half long delays in receiving their R&D tax incentives with the Tax Office conceding that it currently has 400 company returns with R&D claims on them that are older than 50 days. Further, guidelines for the new incentive were set to be released in May this year but have since been delayed to August – causing confusion for businesses that are unsure of what they can claim and if they are eligible for the new incentive. In other news, the government has proposed that small businesses be given quarterly access to the incentive.
Staff members the culprits behind misleading carbon tax claims: ACCC
The Australian Competition and Consumer Commission (ACCC) has urged businesses to educate their staff members, as staff-made claims constitute a significant portion of misleading carbon price claims – particularly in the retail and hospitality industries. The ACCC has received allegations of such claims against hairdressers, cafes, bakeries, supermarkets and dry cleaners but said many of the claims had been made by staff that had jumped to conclusions in justifying a price increase rather than through any statement known to the business owner.
Businesses unlikely to see an increase in carbon tax assistance
The Productivity Commission is set to review the impact of the carbon tax on businesses and current levels of industry assistance but seems unlikely to recommend any adjustments, according to a consultation paper released two months ago. From July 1, 2012, a business is able to submit a request that the Productivity Commission assess the impact of the carbon tax on their industry and recommend if government assistance should be adjusted and if so, how. However, the Commission said upward adjustments will only be considered if the carbon tax is having a “materially adverse and unexpected impact on an industry’s competitiveness and is likely to persist”.
Teething problems for ASIC’s new national business register
The Australian Securities and Investments Commission’s new National Business Names Registration System has attracted the ire of businesses who are worried about the transfer of business names and their privacy, particularly in the case of home-based businesses. The register rolled out on May 28, 2012 in replacement of state and territory registers but the Council of Small Business Organisations of Australia (COSBOA) has already started receiving complaints from business owners.