In October, the government announced it would accelerate the already legislated tax cuts for business under $50 million by bringing it forward by five years.
The plan will see those companies facing a tax rate of 26 per cent by 2020–21 before finally dropping down to 25 per cent in 2021–22.
“Confusion has reigned around the cuts to the small business tax rates, which has made what might have seemed like a good way to give something back to small businesses into an exercise in making things excessively complicated,” said H&R Block director of tax communications Mark Chapman.
Mr Chapman believes those changes, coupled with changes to the definition of a base rate entity, have left many taxpayers perplexed.
“With different tax rates each year, changing definitions of what constitutes a small company, changing definitions of what constitutes income that qualifies for the lower rates and flow on effects to the system of franking dividends to shareholders, many small businesses and their advisers have been left scratching their heads in perplexity,” he said.
The Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 had previously been a source of much uncertainty to practitioners and their corporate clients, with the ATO releasing draft practical compliance guideline PCG 2018/D5 in a bid to clarify its compliance and administrative approach.