BDO calls for reform to make the tax system equitable and efficient, particularly for SMEs

24 February 2020

BDO Australia has used its pre-budget submission to call on the Government to make the tax system more equitable and efficient, particularly for small to medium enterprises (SMEs). BDO responded to the invitation from the Assistant Treasurer and Minister for Housing to submit ideas and priorities for the 2020-21 Federal Budget.

Lance Cunningham, National Tax Director at BDO said: “BDO Australia has used its pre-budget submission to call on the Government to reignite the tax reform agenda, with a focus on looking for ways to simplify tax regulations, particularly for SMEs which are the engine room of the Australian economy, employing around seven million Australians.”

“Tax reform is not just about tax cuts, it entails a rational identification of how all aspects of the tax system interact with each other and with the economy and to identify how to ensure the appropriate amount of tax is collected from the right entities without causing much distortion to the economy.

“Our major recommendation is for the Government to re-ignite the tax reform process, not as a one-off but rather as an ongoing process.

“For SMEs we’ve identified three areas which are in dire need of reform:

  1. The structures used by SMEs should be reviewed and the establishment of a ‘small business company’ concept introduced, allowing small businesses to choose to be taxed like partnership and / or allow trusts to choose to be taxed like companies.
    SMEs utilise various types of structures including sole traders, partnerships, trusts and companies. Most of these have complex tax and legal rules and many small businesses are not aware of the risks associated with these. As an alternative, SMEs could be allowed to be taxed as a partnership or company
  2. Simplification of small business concessions – current concessions are too. For example, the small business CGT provisions are one of the most complex pieces of tax legislation that makes it hard for businesses to follow the rules. As a start, the Government should consider implementing the recommendations of the Board of Taxation in Review of small business tax concessions
  3. SMEs should be given a ‘safe harbour’ in respect to a number of technical tax matters such as thin capitalisation, the Controlled Foreign Corporation (CFC) rules, transfer pricing, hybrid mistmatch rules and the application of various FBT exemptions such as the small business car parking exemption.”

The BDO submission includes 22 recommendations: tax reform, company tax, dividend imputation, superannuation, small to medium businesses, capital gains tax, capital allowances, value shifting, loss integrity measures, franking, R&D, investment, employment tax, states taxes, GST and trusts.

View the full submission www.bdo.com.au/en-au/insights/tax/submissions/bdo-s-2020-21-pre-budget-submission