As part of the 2022-23 budget, the government has announced a package of measures to slash red tape and boost the cash flow of more than 2.3 million small businesses and sole traders.
These measures generate an annual compliance saving of $800 million every year; money that businesses can use to invest, innovate and create more jobs for Australians.
The measures include lowering tax instalments in 2022-23 by setting a GDP uplift rate that applies to pay-as-you-go (PAYG) instalments and GST instalments to 2 per cent for the 2022-23 income year. This rate is significantly lower than the 10 per cent rate that would have applied under the statutory formula.
This measure will apply to the 2022-23 income year, in respect of instalments that fall due after the enabling legislation receives royal assent.
The government has also stated it will align instalment payments with financial performance including new measures to leverage technology to automate tax reporting requirements and align instalment payment obligations with financial performance.
These measures will reduce compliance costs, improve processing times and support cash-flow management for SMEs.
The government will also support companies to manage cash flows by allowing companies to calculate PAYG instalments based on financial performance. If financial performance declines, companies may be able to get refunds of instalments paid automatically.
The measure will initially support over 500,000 companies with PAYG instalment obligations.
The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said the reduction of the GDP uplift rate that applies to PAYG and GST instalments from 10 per cent to 2 per cent would free up some cash flow for the collective kitty of small and family businesses, by reducing the tax burden on them.
“Small and family businesses are however advised to keep abreast of their tax obligations as they would need to pay any extra tax owed at the end of the financial year, if their business earnings exceed what is calculated quarterly,” he said.
“We welcome the government’s proposed update of the PAYG system from early 2024 to allow for PAYG to be calculated in real time, based on the how the business is tracking financially.
“These proposed [changes] would provide an automatic refund of tax paid in the year if a company with PAYG instalment obligations reports a substantially lesser profit than anticipated or indeed a loss.
“Reducing red tape allows small and family businesses to get on with what they do best – growing their business.”
Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry said the proposed reforms are a “smart approach to deregulation”.
“Practical measures to reduce the hand breaks on business will save time on compliance, reduce costs, and boost efficiency, benefitting all Australians,” he said.
“The strength of our economic recovery is contingent on removing the regulatory burden on business, particularly for small and medium enterprises.
“Cutting unnecessary red tape will be instrumental in encouraging businesses to expand their operations. If we are to achieve higher living standards and increase wages growth, ensuring businesses are empowered to lead the post-pandemic recovery is fundamental.
“Changes to the calculation of pay-as-you-go (PAYG) instalments from next financial year will benefit more than 2 million small businesses, enabling employers to invest in productivity enhancing measures and take on new hires.
“The establishment of an automated system that adjusts tax instalment calculations based on annual financial performance will act as a critical cashflow boost when many businesses are struggling with increased costs.
“Sharing of single touch payroll data with state and territory governments allowing for pre-filling payroll tax returns and forms, is an important reduction to the costs of regulatory compliance.
“The administration of trusts is also set to be streamlined with the digitising of income reporting brought up to speed with modern technology and business practices.”
