NO.007

The Government is today announcing significant changes to ease the compliance burden for taxpayers in the PAYG system and to simplify and streamline GST payment and reporting arrangements for small businesses.

Based on the experience of two quarterly returns and following extensive consultation with business and accounting groups with a specific focus on the needs of small business, these measures will dramatically reduce reporting requirements.

Under the PAYG changes, almost two million taxpayers will be given the option to have their quarterly PAYG instalments calculated for them by the Tax Office. This means they will not have to calculate their income on a quarterly basis. The quarterly instalment payment will be calculated by the Tax Office from the previous available years income adjusted by a GDP factor. Any balance payable will be done on an annual income tax return.

This option will be available to around 1.5 million individuals registered for GST eg. sole traders and partners, and to Companies and Superannuation Funds with a turnover under $1 million.

In addition, taxpayers with a balance on their last assessment of less than $250 will be taken out of the PAYG system and only need pay tax on such income upon annual assessment. Almost 500 000 people, including many self-funded retirees, will be taken out of the instalment system, under this measure.

The GST measures, announced today, are for those businesses which now report and pay quarterly. (This is open to businesses with a turnover of less than $20 million.)

For all businesses in this category streamlined reporting arrangements will see quarterly GST payments made on the basis of a simple remittance form with an annual information statement required to be lodged no later than their annual income tax return (or 28 February 2002 for the 2000 2001 year if that is earlier). The quarterly remittance form will require report of sales, GST collected on sales, and GST paid on purchases. These are the labels G1, 1A and 1B, on the BAS.

Businesses which fully comply with the current system need not change from their current arrangements.

A new option will be introduced for businesses with a turnover less than $2 million. They will have the option to pay quarterly GST instalments based on 25 per cent of the previous year’s net GST amount, adjusted by a GDP factor. Those choosing this option will only have to submit one return on an annual basis. This return will be due no later than the time they submit their annual income tax return (or 28 February 2002 for the current year). Variation provisions will be available where previous years adjusted payments are not suitable.

In recognition of concerns about lodgement dates, quarterly payments will now become due on

28 July, 28 October, 28 February and 28 April.

Those who choose the GDP-adjusted method will simply pay an amount calculated, and in time pre-printed on the form, by the Tax Office. Where possible, forms will be customised to remove boxes like Fringe Benefits tax, Wine Equalisation Tax and Luxury Car Tax for businesses which do not have these obligations.

For those using the quarterly remittance there will be an annual information statement which will require details of exports, other GST-free sales, capital and other purchases for compliance reasons.

For those on the GDP-adjusted method their annual return will include these matter plus annual sales and actual GST payable.

At this stage, with only 2 quarterly returns, it is not possible to base the 3^rd and 4^th quarterly instalments on the annual amount of GST uplifted for GDP. Nevertheless, the Government has decided to introduce these arrangements immediately to apply from the 3^rd and 4^th instalments. (Due 28 April and 28 July 2001)

Businesses choosing the GDP-adjusted instalment option for GST will be able to pay their 3^rd and 4^th quarterly instalment as an amount equal to the amount they paid in their 2^nd quarter BAS. For the next financial year 2001 2002 quarterly payments will continue on the basis of the 2^nd quarter payment uplifted, until the time of the annual return.

The Tax Office will mount an extensive information and education campaign to accompany these changes.

The Tax Commissioner will administer the new streamlined arrangements from this date under the existing legislation. The Government will introduce such legislation as is required to implement these arrangements as soon as possible.

CANBERRA

22 February 2001

Australian Tax Office