Government Response to the Board of Taxation’s Review into Tax Impediments Facing Small Business
Board of Taxation Recommendation:	Government Response:	
Australian Business Number (ABN)	
The Board recommends that the ATO revise Miscellaneous Taxation Ruling MT 2006/1 and other guidance material to include activities which will evidence that an applicant is intending to carry on an enterprise and is therefore eligible for an ABN.
(Recommendation 4.1)	The Government supports making it easier to start a small business. 
The Government notes that the ATO has already taken steps to implement this recommendation.  
The ATO is already working to deliver improvements to the ABN online registration facility that will make it easier for start-up businesses to self-assess their entitlement to an ABN.  The improvements will also make it easier to obtain an ABN by assisting the applicant to get the information right at the time of the interactive on-line registration process.	
The Board also recommends that the ATO provide a ‘hotline’ so that where an application has not issued in circumstances where it is important to the applicant it be issued urgently, or is rejected, there is access to the ATO for assistance.
(Recommendation 4.2)	The Government supports making it easier to start a small business. 
The Government notes that the ATO has taken steps to implement this recommendation.  
The ATO recently introduced a specific phone number (139 ABN) for registration and cancellation enquiries and for updating ABN details.  The ATO will investigate building upon this to provide a ‘hotline’ facility.  
In addition, the Commissioner has committed to reviewing the disclaimer with respect to the ATO’s operations to see whether there is scope to provide more certainty for small business who use the ABN Lookup tool for tax purposes.	

Employee/contractor decision tool	
The Board recommends, as part of the ATO’s review of the operation of its employee/contractor tool:
•	it considers how the tool could better reflect or provide guidance in circumstances where a person is working through an interposed entity (company or trust); and
•	it considers incorporating into the tool its guidance on who is an ‘employee’ for superannuation guarantee (SG) purposes to provide more certainty for employers in respect of their SG obligations.
(Recommendation 4.3)	The Government supports changes which would make it easier for small businesses to understand their tax obligations.  
The ATO has already commenced work to implement this recommendation with consultation with interested parties having commenced in July 2014.
The ATO is also taking the opportunity to review the decision tool to ensure it is still meeting the needs of its users.	
Personal Services Income (PSI) rules	
The Board commends the steps already undertaken by the ATO to develop a prototype on‑line decision tool and recommends that the ATO continues to develop it. The Board recommends that:
•	The tool should go further than just working through the PSI tests; it should where possible incorporate material that clarifies what the result means for the taxpayer.
•	Furthermore, where the PSI tool is used in good faith the tool should provide a decision that will provide protection from the imposition of penalties where the user relies on the outcome.
(Recommendation 4.4)	The Government supports changes which would make it easier for small businesses to understand their tax obligations.
The recommendation is in the process of being implemented by the ATO with consultation on a prototype having commenced in August 2014.	
The Board recommends that, given the uncertainty and complex nature of the PSI rules, that as well as the decision tool the ATO examine ways to better explain the PSI rules and how they apply.
(Recommendation 4.5)	The Government supports changes which would make it easier for small businesses to understand their tax obligations.
The Government notes that the ATO has already taken steps to implement this recommendation.  	
Activity Statements – reporting obligations	
The Board recommends that the ATO, and its relevant advisory groups, review whether the quarterly reporting obligations for small businesses could be significantly simplified including whether at the end of each financial year businesses could complete a combined Income Tax Return and Annual Business Activity Statement based on the same data. 
(Recommendation 4.6)	The Government supports changes which would make it easier for small businesses to understand their tax obligations.
The Government notes that the ATO is investigating this recommendation further to ensure that they can meet the intended outcome. Consultation through relevant forums will commence in the near future.	
Taxable Payments Reporting System (TPRS) 	
The Board recommends the alignment of the 21 July TPRS reporting date with the 28 August BAS lodgement date to the latter date.
(Recommendation 4.7)	The Government notes this recommendation, and further notes that it is envisaged that the TPRS will be subject to a post implementation review in 2015-16.  	
The Board recommends that a full analysis of the effectiveness of the TPRS be undertaken once complete data is available.
(Recommendation 4.8)	The Government notes this recommendation, and further notes that it is envisaged that the TPRS will be subject to a post implementation review in 2015-16.  	
Transfer pricing	
The Board recommends that the ATO develops guidance for small businesses to provide some certainty as to documentation requirements for transfer pricing transactions. 
(Recommendation 4.9)	The Government supports changes which would make it easier for small businesses to understand their tax obligations.
The Government notes that the ATO is developing measures designed to minimise transfer pricing documentation requirements. These will be implemented in this financial year.	

Small business entity threshold 	
Based on an analysis of business population data, the Board recommends that the small business entity turnover threshold be increased to at least $3 million and investigate the feasibility of an increase to $5 million.
(Recommendation 5.1)	The Government supports reducing the regulatory burden on small business and will consider small business taxation in the context of the Tax White Paper. 	
Superannuation	
The Board recommends allowing employers to assess superannuation obligations for employees against a quarterly threshold of $1,350. Employers who do not wish to change their current systems and processes will still meet their superannuation obligations if they continue to test on a monthly basis.
(Recommendation 5.2)	The Government does not support this recommendation.
This proposal could reduce superannuation for some low income earners and would not reduce compliance costs for the majority of small business that pay their SG monthly.	
The Board recommends that the superannuation guarantee charge be calculated on the basis of OTE rather than salary and wages to align it with the way that superannuation contributions are calculated. While OTE is a more complex definition it would mean no change to employers’ current calculations.
(Recommendation 5.3)
	The Government supports this recommendation and has agreed to implement this proposal from 1 July 2016 as part of the package of reforms to be implemented to reduce small business superannuation compliance costs.  The Government will consult with stakeholders on implementation details.	
The Board recommends that the calculation of the SG Charge components be redesigned by legislation.
(Recommendation 5.4)	The Government supports this recommendation and has agreed to simplify and reduce the severity of the SG Charge with effect from 1 July 2016 as part of the package of reforms to be implemented to reduce small business superannuation compliance costs.  The Government will consult with stakeholders on implementation details. 	
The Board recommends that the SG Charge and any employer contributions paid to a superannuation fund that are used to offset the SG Charge payable should be deductible to the employer when the amounts are paid.
(Recommendation  5.5)	The Government does not support this recommendation. 
The Government has agreed to reduce the severity of the current SG Charge arrangements (see response to Recommendation 5.4) and in the context of these changes considers that retention of non-deductibility is important to deter non‑compliance.	
The Board recommends the removal of the automatic requirement on employers to lodge an SG Charge statement (and the associated documentation) with the ATO when they become liable to the SG Charge. 
(Recommendations 5.6)	The Government notes this recommendation and further notes that there will be opportunity for this proposal to be considered during consultation on the changes to the SG Charge arrangements. 	
Fringe Benefits Tax (FBT)	
The Board recommends an increase to the ‘minor and infrequent’ threshold from $300 to, at least, $500. This is arguably a reasonable level that keeps the threshold current. 
(Recommendation 5.7)	The Government supports reducing the regulatory burden on small business and will consider FBT in the context of the Tax White Paper.  	
The Board also recommends that there be an investigation of the possibility of aligning the FBT year to the income tax year.
(Recommendation 5.8)	The Government supports reducing the regulatory burden on small business and will consider FBT in the context of the Tax White Paper.