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Simpler Tax for Small Business



The Government has announced a package of measures that will make it easier for small businesses to meet their tax obligations.

There are up to two million Australian small businesses, around 95 per cent of all Australian businesses, and the Government is committed to helping them by reducing red tape and compliance costs.

From 1 July 2007, businesses with annual turnover of less than $75,000 will no longer be required to register for GST. The GST registration threshold for non-profit bodies will be increased to $150,000. This means that both thresholds will be higher in real terms than when the GST was introduced in July 2000.

Increasing the GST threshold is one of a range of Government initiatives in response to the Banks Taskforce report Rethinking Regulation: Report of the Taskforce on Reducing Regulatory Burdens on Business. As a result of the new arrangements, more small businesses and non‑profit bodies can choose whether to register for GST. If they do register, they will have the option of remitting GST only once a year.

Effective from 1 July 2008, the Government will allow these taxpayers to pay their pay as you go (PAYG) instalments on an annual basis. The other existing eligibility tests for paying annual PAYG instalments will be maintained.

By aligning the PAYG instalments with the annual GST arrangements, eligible businesses will be able to lodge only one Activity Statement per year, reducing their compliance costs.

The Government will be introducing legislation, flowing from announcements last year, which, from 1 July 2007, will standardise the eligibility criteria for accessing the small business concessions for GST, the Simplified Tax System, capital gains tax, fringe benefits tax and PAYG instalments. Small businesses will only have to apply one eligibility test relating to the size of the business to access this range of small business concessions. Any business with turnover of less than $2 million will be able to access any of these concessions, subject to their usual terms.

The Government will allow more simplified accounting methods for small businesses. This will give more small businesses the option of using a simplified method to calculate their GST obligations if it suits their requirements. From 1 July 2007, any small business that makes mixed (taxable and GST-free) supplies or mixed purchases will be able to approach the Australian Tax Office (ATO) to discuss the development of a simplified accounting method for their use.

From 1 July 2007, purchases by businesses valued at $75 or less (not including GST) will no longer require an approved tax invoice to claim an input tax credit. The current threshold is $50. For purchases of $75 or less business will be able to rely on the same record keeping for GST and income tax purposes. This will reduce compliance costs and be of particular benefit to small businesses.

From next year, small businesses with excise obligations will be able to settle these on a monthly, rather than weekly, basis.

Those who are just starting out in business may be unfamiliar with GST, record keeping obligations and the information necessary to complete the Business Activity Statement. The Government will spend $40 million over four years to provide more face to face and telephone tax assistance to new businesses, particularly those who prepare their own Business Activity Statement. Often the pressure of getting their business up and running means that they are not able to devote sufficient time to tax matters. The New Business Intensive Assistance Programme will help them get on the right track by providing individually focused advice and assistance, for example in registering for the ATO’s business portal, establishing an effective GST record keeping system and assisting them with electronic reporting obligations such as PAYG withholding.

The Government will be seeking the unanimous agreement of the States and Territories to the GST changes.


8 May 2007

Media Contact: David Gazard: 02 6277 7340