Category: Business

Simpler BAS

The Government and the ATO have heralded this a big reduction in red tape for small business but for most it will be the dropping of one number only. The total purchases figure, which you will probably need to have calculated to work out how much GST you paid suppliers.

From 1 July 2017, Simpler BAS is the default reporting method for small businesses with a GST turnover of less than $10 million. They have less GST information to report on their BAS.

Small businesses only need to report:

  • G1 Total sales
  • 1A GST on sales
  • 1B GST on purchases

The following GST information is no longer required:

  • G2 Export sales
  • G3 GST-free sales
  • G10 Capital purchases
  • G11 Non-capital purchases

Simpler BAS does not affect how other taxes are reported (eg PAYG income tax instalments or PAYG tax withheld), or how often you lodge your BAS.

You still need to keep records, such as tax invoices, as proof of any claims you make in your BAS and income tax return lodgements.

This short video provides an overview of Simpler BAS.

ASIC insolvency statistics update

 

Australian Securities and Investments Commission (“ASIC”) has released the following summary and observations after a review of statutory reports lodged by liquidators, receivers and voluntary administrators for the year ending 30 June 2016.

• 10,078 external administrator reports were lodged, with NSW accounting for 38.2%.

• Of those, 79% related to companies with less than 20 employees.

• The industries with the highest levels of representation were business and personal services (31%) and construction (21%).

• 86% of the failed companies were assessed at having estimated assets of $100,000 or less with 61.2% had estimated assets of $10,000 or less.

• The top three claimed causes of failure comprised inadequate cash flow (46%), poor strategic management (46%) and poor financial control (34%).

• Possible causes of misconduct leading to insolvency included insolvent trading (61%), obligation to keep financial records (42%), and failure of directors to act with care and diligence (38%).

• Most categories of potential misconduct related to

alleged breaches of civil obligations (81.1%).

• The dividends estimate to unsecured creditors in

97% of cases was less than 11 cents in the dollar.

ATO debts to be reported to credit agencies

The Federal Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) included an announcement that from 1 July 2017 the Australian Taxation Office (ATO) can disclose to Credit Reporting Bureaus the tax debt information of businesses that have not effectively engaged with the ATO to manage those debts. This will be a new and unprecedented power for the ATO.

This measure is part of the Government’s strategy to reign in overdue tax and improve transparency of taxation debts, and will initially only apply to businesses with an Australian Business Number and tax debt of more than $10,000 that is at least 90 days overdue.

The policy should not come as a surprise given it has been on the Government’s agenda for a number of years, having been touted at least as far back as 2014.

The MYEFO confirms the ATO is owed $19b in overdue tax, approximately two thirds of which is owed by small businesses with a turnover under $2m. The rising level of debt, particularly in small business, presents a growing challenge for the ATO as they are faced with managing the delicate balance of collecting tax arrears without (where possible) suffocating the cash flow of the business.

Compounding this challenge, the current consequences for failing to pay the ATO have no real tangible impact on the day-to-day operations of a business. Failure to lodge and general interest charge penalties, and in some instances imposing personal liability on directors, do not typically influence a business continuing to trade. This means that ATO debt is often pushed to the back of the queue, and will be allowed to accumulate—often until the ATO pursue legal proceedings.

That landscape is about to change, as defaults being recorded on a taxpayer’s commercial credit file will have immediate and lasting consequences for a defaulting taxpayer. A credit default is a black mark that lasts for five years, and creates an environment where support from financiers may be withdrawn and supplier credit stopped.