Australian Small Business and Family Enterprise Ombudsman Kate Carnell has urged the Australian Taxation Office (ATO) to refrain from returning to heavy-handed tactics, with collection action expected to ramp up as debts owed hit a record high.
Carnell, who leaves the job next week, is concerned small businesses may be subjected to the harsh debt recovery actions inflicted prior to the COVID crisis, given collectable debt owed to the ATO has peaked at $34 billion – the majority of which is owed by small business ($21 billion).
| The ATO 'too often it loses sight of
the people running the business':
Kate Carnell, ASBFEO
“The ATO rightly took a softer approach towards small businesses during the COVID crisis, but we don’t want to see a return to the extreme enforcement actions my office brought to light just a couple of years ago,” Carnell says. “Previous actions such as garnishee notices have crippled small businesses, so it is critical the ATO uses its powers proportionately and appropriately, particularly as small businesses work to get back on their feet.”
The Ombudsman has called for a range of reforms to address the ATO’s treatment of small businesses in a new report: A tax system that works for small business.
Recommendations include: waiving interest and penalties for a first offence; restricting ATO review and audit periods to one year when a small business is using an accredited tax or BAS agent; and immediately ceasing debt recovery action against a small business that is seeking a review of its tax position, regardless of whether the dispute is before the AAT.
“It’s important that small businesses in dispute with the ATO are given a fair go,” Carnell says. “The ATO quite reasonably sees its role as an enforcer of taxation laws, but too often it loses sight of the people running the business. This is particularly evident in the area of debt collection, but it’s exacerbated by our overly complicated tax laws.”
The report recommends making compliance easier by allowing small businesses to opt-in to GST being collected and remitted directly to the ATO at the electronic point of sale, as well as income averaging measures that would help small businesses pay the right amount of tax in good years and bad.
“Tax compliance costs small businesses about $90 per $1,000 turnover - about 225 times more than the cost for big business ($0.40 per $1,000 turnover),” Carnell says. “Under the current system, small businesses are the ATO’s unpaid tax collectors including everything from the GST to PAYGW.
“Over the past few decades, administration responsibilities have shifted from the government to small businesses, which face significant penalties and interest if an honest mistake is made.
“That’s why our report makes a number of recommendations to take this unnecessary burden off the shoulders of small businesses. At the end of the day the taxation system should be easy to get right and hard to get wrong.
“Now is the time to deliver a system that works for the small business sector and will allow them to achieve greater productivity, return to profitability and grow employment – especially given so many small businesses have endured enormous challenges over the past 12 months.”
Bruce Billson appointment welcomed by Ombudsman’s office
|Incoming ASBFEO Bruce Billson
The office of the Australian Small Business and Family Enterprise Ombudsman has welcomed the appointment of the Bruce Billson to the top job.
Billson will commence his five-year term as the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) on Thursday March 11, 2021, replacing inaugural ASBFEO Kate Carnell AO.
Carnell welcomed the appointment, describing the former Small Business Minister as a champion of the sector. “Having played an integral role in the establishment of the Ombudsman’s office, Mr Billson is well positioned to carry the torch,” Carnell says. “He is highly regarded by the small business community and I am confident he will be an effective advocate for the sector.”