Business groups believe the Morrison government is taking a “smart approach” to deregulation with a budget proposal to reduce red tape, while improving the cash flow for small businesses.
In the latest measure to emerge from his pre-budget blitz, Treasurer Josh Frydenberg announced a reduction in the pay-as-you-go tax instalment rate to two per cent for the 2022/23 income year from the standard 10 per cent.
A reduced uplift rate is expected to lower instalments and deliver $1.85 billion in cashflow support.
Treasury estimates more than two million businesses and sole traders currently using the pay-as-you-go instalment method will benefit from the changes.
Mr Frydenberg says the returns from the package will allow small and medium-sized businesses and sole traders to invest, innovate and grow job opportunities.
“The reforms will allow small business to report only once to meet their Commonwealth, state and territory tax obligations; automate processes; and minimise reporting requirements to support cash flow and slash red tape,” he said.
The government will also support companies to manage their cash flows by allowing them to calculate PAYG instalments based on their annual financial performance.
Other measures involve automating tax instalment calculations, sharing data collected by the tax office to allow tax returns to be pre-filled, and digitising income reporting for trusts.
They are expected to result in annual compliance savings of more than $800 million a year.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said this is a smart approach to deregulation.
“Practical measures to reduce the handbrakes on business will save time on compliance, reduce costs, and boost efficiency, benefiting all Australians,” Mr McKellar said.
“The strength of our economic recovery is contingent on removing the regulatory burden on business, particularly for small and medium enterprises.”
The Tax Institute said being smarter with technology is also a welcome measure.
“Being smarter about how the ATO collects information, and what they do with it, is only a good thing and this will be a welcome reduction in compliance costs,” the institute’s general manager, tax policy and advocacy Scott Treatt said.
Maeve Bannister and Colin Brinsden
(Australian Associated Press)