In a bid to appeal to the small company sector Prime Minister Kevin Rudd today declared that if he’s re-elected he’d proceed to reduce the red tape associated with GST coverage for smaller companies. Under this suggestion any company with an yearly turnover of 20 million or less would just need to document their Business Activity Statements (BAS) after annually. Encompassed in the announcement is a list of their company’s income and the total amount of GST (Goods and Services Tax) collected and paid, and any additional tax related tasks throughout the period under review.
The BAS process basically involves a self assessment from the company of the own indirect taxation (GST), along with the payment and maintain for GST payments created is a vital part of its objective. Presently the only companies which will need to register for GST are the ones which have an yearly turnover of $75,000 or more. But, taxi owners should register for GST irrespective of their yearly turnover. Reporting for BAS could be performed on a monthly, quarterly or yearly basis. According to the ATO most companies decide to cover their GST quarterly. The announcement provides several alternatives for BAS lodgement based on the business’s yearly turnover.
Current Statement Of Business Activities
For companies with annual turnovers of $20 million or even more the frequency of GST coverage is yearly. This should also normally be performed through the ATO’s internet payment method. For companies which have annual turnovers of $20 million or less, the need will be for GST to be computed quarterly but reported yearly. This effectively divides the GST reporting against the PAYG and other tax obligations that could be accomplished yearly with the company’s tax return. In the event of small businesses using $2 million or less in yearly turnover there’s the choice of a Rs GST payment.
This can be evaluated by the ATO and diverse by the company, with an yearly report filed of the true GST paid or collected. So how significant is this suggested change? Diminishing the requirement to report into the taxation office on a quarterly basis will be welcome from most small business owners since it will relieve some of the period that has to be spent preparing and submitting the BAS. On the other hand, the total requirement to always track GST payments and collections, in addition to the company’s own PAYG business tax obligations and any PAYG obligations for workers won’t evaporate.
Among the most important issues confronting small business owners is the capacity to handle cash flow. I’ve written about this in previous posts in The Conversation. It’s essential that small company owner managers learn to handle their money flow. An often overlooked advantage of the GST, and also the demand for companies to routinely report it to the ATO, is the fact that it enforces a discipline on the company owners to track their cash flow.
Modern bookkeeping software packages create the BAS reporting procedure highly efficient and simple to control. Even micro businesses without employees aside from the operator can handle these programs without undue time or complexity if they’re appropriately configured.
So How Important Is This Proposed Change?
The advantage of a quarterly BAS reporting cycle for smaller companies is they can monitor their gain and decrease over the entire year, pay their GST, and get some GST credits and produce PAYG business and worker taxation instalments as they go. For most this will last to become a better choice than leaving everything to the end of this year. For a principle the concept that authorities can take action to decrease the compliance costs or red tape burden on small companies is a favorable one. On the other hand, the subject of earning routine BAS reports and therefore helping to keep tabs on the money flow and financial functioning of the company remains significant. Of those companies, only 6 percent had yearly turnovers over $2 million.
Even fewer companies would have over $20 million in annual turnover consequently enabling the great majority of companies to determine of frequent BAS reporting. By getting rid of the requirement for many companies with annual turnovers of $20 million or not, the outcomes could be intriguing. To begin with, the group of GST earnings would possibly slow down if nearly all companies adopted this yearly reporting cycle. Secondly, there’s the probability of softening the financial reporting field of Australia’s small business sector with the possibility of undesired effects on cash flow administration. SEAANZ is a non-profit organisation based in 1987. It’s devoted to the advancement of research, education, practice and policy at small to medium businesses.