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The government has been called to adopt a harmonised definition of a small business entity by adopting a standard $10 million per annum turnover threshold, a new review has put forward.
The government has finally released the Board of Taxation’s review of small business tax concessions after it was completed and delivered to the Treasurer in March 2019.
The headline recommendation in the self-initiated review has called for the government to scrap multiple small business definitions in tax and apply the $10 million threshold uniformly across all small business tax concessions.
The recommendation comes after the varying rules and eligibility criteria around different small business concessions were criticised by various stakeholders in the tax profession.
It has also called for the maximum net asset value test to be repealed and to collapse the 15-year exemption, active asset reduction and retirement exemption, replacing them with one CGT exemption subject to a cap.
The unincorporated small business tax discount was also identified as an area of improvement and has recommended that it be replaced with an alternative program or be substantially amended to be a meaningful incentive.
The 109-page report put forward a total of 12 recommendations, including calls to simplify the small business pooling rules by having a single depreciation rate of 30 per cent, and reintroduce loss carry-back rules.
The government has yet to release its official response to the review.
“The Board’s view is that genuine and long-lasting reform can only be achieved by adopting a small business life-cycle approach which ensures that concessions will be more efficiently targeted to the right stages of the small business’s growth cycle,” the review said.
“Tax policy challenges facing small businesses are inevitably inhibited by the same obstacles facing any tax or regulatory reform, including competing vested interests from special interest groups, fears of consequences of change, and accompanying uncertainties that ensue.
“The Board encourages policymakers to continue to work together with the small business sector for the benefit of the whole economy.”
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