Small businesses need better tax certainty: COSBOA

The proposed discretionary trust minimum tax and CGT changes have led to a furore among small businesses, highlighting the significant financial burdens placed on SMEs, and the potential to kill bucket companies and the need to undergo costly restructuring.

The concern arises from the proposed minimum tax rate on discretionary trust distributions, which exceeds the existing 25 per cent small business company tax rate, potentially leading to costly and complex restructuring, which is neither fast, simple, nor inexpensive, Skye Cappuccio (pictured), chief executive at COSBOA, said.

“We have welcomed positive signals that the Government is acting to reduce unnecessary red tape. Yet the proposed tax changes are increasing complexity, compliance costs and uncertainty for the small business sector,” Cappuccio added.

The council warned that the measure risks capturing a large number of “genuine” small businesses that use discretionary trusts for legitimate commercial reasons such as asset protection, succession planning, managing fluctuating income and supporting intergenerational family enterprises.

“Every additional dollar spent on administration, restructuring and compliance is a dollar not invested into employing staff, adopting technology, expanding operations or growing productivity,” Cappuccio said.

“The proposed changes risk undermining one of the fundamental incentives that drives entrepreneurship and long-term small business investment in Australia,” Cappuccio said.

“If the reward for that risk is reduced or made more uncertain, Australia risks sending exactly the wrong message to people who are creating jobs, investing in their communities and building productive enterprises.”

“If we want a stronger economy, we need policies that encourage entrepreneurship, investment and long-term business growth – not settings that make it harder, more expensive and more uncertain to build a small business in Australia.”