A compliance fillip for small businesses

An estimated 372,500 small Australian businesses are set to benefit from administrative changes to pay as you go (PAYG) instalment thresholds.

Minister for Small Business, Bruce Billson, told a G20 conference on small and medium-sized enterprises (SMEs) in Melbourne last month that his government planned to reduce compliance costs for taxpayers by $56 million a year by reducing PAYG reporting requirements for a range of small businesses.

“By simply reviewing thresholds that are more than a decade old, we can cut the red tape burden which lands most heavily on small business,” he said.

“Around 32,500 small businesses will no longer have to lodge a business activity statement (BAS) simply to report their PAYG instalments.  A further 340,000 small businesses will still be required to lodge a BAS, but will no longer have to interact with the PAYG instalment system.”

The PAYG tax instalment system allows small businesses to pay portions of tax throughout the year to meet their expected income tax liability for the full financial year.

Billson added that the following threshold changes, which had not been reviewed since 2001/02, were being considered by the government:

  • Increase the business or investment income threshold from $2,000 to $4,000.
  • Increase the balance of assessment threshold from $500 to $1,000.
  • Increase the notional tax threshold from $250 to $500.
  • Remove the requirement for entities registered for GST to remain in the system even if they have a zero instalment rate.

If taxpayers no longer met the PAYG instalment thresholds, they would be automatically exited from PAYG instalments. The Australian Taxation Office (ATO) would write to each business and individual to withdraw their instalment rate.

If taxpayers still wished to pay instalments towards their end of year tax liability, they could voluntarily re-enter PAYG instalments by contacting the ATO on 13 28 61. 

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