$800 million small business recovery package: the breakdown

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• Tax

As part of the 2022-23 Budget, the Government has announced a package of measures to slash red tape and boost the cashflow of more than 2.3 million small businesses and sole traders.

According to Treasurer Josh Frydenberg, these measures will “generate an annual compliance saving of $800 million every year – money that businesses can use to invest, innovate and create more jobs for Australians.”

Small business package – the breakdown

Lowering tax instalments in 2022-23

The Government will set the GDP uplift rate that applies to PAYG instalments and GST instalments to two per cent for the 2022-23 income year, a reduction from the 10 per cent rate that would have previously applied.

A lower uplift rate will mean lower instalments, delivering $1.85 billion in cash flow support for 2.3 million small to medium businesses, sole traders and individuals with passive income (including some self-funded retirees) that are eligible to use the instalment amount method.

Scott Treatt, the Tax Institute’s general manager, tax policy and advocacy, told Accountants Daily capping the GDP uplift rate for PAYG and GST instalments at 2 per cent for the 2022-23 is a welcomed move.

“An uplift of 10 per cent, which the government indicates would otherwise have been the case, would be an unnecessary burden on many small businesses,” he said.

Mr Treatt continued, adding though the capping was appreciated relief, small businesses should continue to work with their tax advisers to manage cashflow and examine all their options when it came to paying their tax and GST obligations.

“For some businesses who have recovered, capping the increase at 2 per cent for instalment payments may only defer higher costs until the final payment at the end of the year,” he said.

“They will need to plan for this.” (Source: Accountants Daily)

This measure will apply to the 2022-23 income year.

Aligning instalment payments with financial performance

The 2022-23 Budget includes new measures to leverage technology to automate tax reporting requirements and align instalment payment obligations with financial performance.

These measures will reduce compliance costs, improve processing times and support cash flow management for SMEs.

Improved cash flows through real-time PAYG instalment system

From early 2024, PAYG will be calculated in real-time based on current financial performance, which according to the government would allow an automatic refund of tax paid in the year if a large loss is reported.

Facilitating pre-filling of payroll tax returns through data sharing

By late 2023 the Government will facilitate sharing of single touch payroll data with State and Territory Governments on an ongoing basis to cater for pre-filling payroll tax returns.

This will facilitate further investments by States and Territories in their own systems to improve lodgement accuracy, reduce compliance costs and save time for small businesses that have payroll tax reporting obligations.

Smarter reporting of taxable payments

The Government will allow eligible businesses the option to report taxable payments reporting system data via software at the same time as activity statements. Businesses that opt into automatic reporting will no longer need to invest time and money filling out the yearly Taxable Payments Annual Report.

Currently, approximately 190,000 businesses that contract for services relating to building and construction, cleaning, road freight and courier, security, investigation, surveillance or information technology services are required to fulfil this obligation on an annual basis.

Digital trust income reporting

By 2024, the Government will develop systems to ensure all trusts will have the option to lodge income tax returns electronically. Digitalising the reporting of trustee and beneficiary obligations will reduce errors and processing times and create capacity to pre-fill beneficiaries’ tax returns.

Changes to reporting requirements

The Government is lowering the costs of doing business for manufacturers, importers and distributors in the alcohol and fuel sectors by enabling businesses with an annual turnover of less than $50 million to lodge and pay excise and excise-equivalent customs duty on a quarterly basis, from 1 July 2023.

Currently, most of these businesses report monthly, with some reporting weekly. The new quarterly lodgement schedule will better align with the reporting and payment schedule of other indirect taxes, with returns and payments required no later than the 28th day of the month after the end of each quarter.

More information

To learn more about the newly announced package and how it could affect your business, book your obligation free chat with the Elevate Accounting team HERE or call 08 9460 1040.