The Federal Government has made a pre-Budget announcement that there will be cashflow support provided to small and family businesses through changes to PAYG tax.
Under the proposed changes, the 10 per cent GDP uplift rate that applies to PAYG and GST instalments will be reduced to two per cent for the 2022-23 financial year, subject to the legislation being passed in parliament.
The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, has welcomed the announcement and the fact that it allow for PAYG to be calculated in real-time, based on how a business is tracking financially.
“This measure would free up some cash flow for the collective kitty of small and family businesses, by reducing the tax burden on them,” Billson said. “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.
“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,” Billson added. “These proposed changed 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.”
The government also announced broader measures to utilise technology in reducing compliance costs and improving the processing times for small and family businesses. Primarily among these measures for small businesses will be the fact that tax returns and other forms will be able to be pre-filled thanks to the digital links established between Single Touch Payroll data from the ATO and state governments. It is estimated that this will benefit about 170,000 businesses that pay payroll tax.
Similar technology will be used to pre-fill annual tax returns using BAS for contractors who use the taxable payments reporting system. The government estimate this will benefit up to 190,000 businesses.
“Reducing red tape allows small and family businesses to get on with what they do best – growing their business,” Billson said. “Ultimately, we welcome any measure that supports small and family businesses in driving jobs growth, particularly during this national recovery phase. Moves to remove unnecessary headwinds are helping make Australia the best place to start, grow and transform a business.”
