Targeted, simpler small-business tax concessions welcomed

The Institute of Public Accountants (IPA) has commended the Board of Taxation for its holistic review of small business tax concessions. The report was tabled by the Government in December 2019.

“The IPA has long advocated for simplifying the tax concessions regime for small business to ensure greater simplicity and efficiency; and, importantly to ensure they meet the intended policy objectives,” IPA general manager technical policy, Tony Greco, said. “This holistic review introduced the important concept of concessions helping small businesses at all stages of their business life cycle, from crucial inception and survival stages through to maturity and retirement phases.”

Greco added that the life cycle approach would allow for better-targeted assistance to meet real-world commercial issues facing small businesses at every step of the way, and that tax concessions can be better utilised by addressing challenges that face small businesses, particularly with fundamental changes to traditional ways of doing business.

“The retention of the $10 million small business threshold definition and the alignment of all small-business tax concessions to this definition is seen as a positive step towards removing the complexities of the current system,” Greco said.

“We are also very pleased to see the adoption of our signature policy recommendation of improving the unincorporated small business tax discount by increasing the cap to what will be a more meaningful incentive.”

Under the new scheme, small business capital gains tax (CGT) concessions will be made simpler, fairer and more sustainable by increasing the turnover threshold to $10 million (currently $2 million), repealing the net asset test, and collapsing three exemptions into a single capped exemption.

“The capping of the small business CGT concessions will make this important tax concession more sustainable as the cost is significant and continues to grow. This will go a long way in addressing the issue of a large proportion of the benefits being accessed by a relatively small number of businesses,” Greco concluded.

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