Government's tax overhaul leaving small businesses in limbo, says CPA

CPA Australia tax lead, Jenny Wong, said the latest consultation contains some compliance relief improvements and practical measures, but they are only one element of a reform package that will fundamentally reshape Australia’s property and CGT settings. 

Wong noted that small businesses needed clarity and simplicity, rather than a growing pipeline of technical and overlapping reforms. 

"We are now dealing with the most significant overhaul of property and capital gains tax in a generation, and complexity and compliance cost remain the central issue for taxpayers and their advisers,” Wong said.

"Tax reform should support productivity, jobs, investment and business confidence. Instead, many small businesses are facing an increasingly complicated operating environment, with more red tape, more compliance obligations and rising costs. 

The changes follow CPA's submission to Treasury regarding the latter's Minimum tax on discretionary trusts consultation paper, in which the body cited individual restructuring costs of up to $23,000 and a national burden of nearly $2.5 billion per annum. The accounting body has slammed the blanket measures, calling for targeted reforms to trust taxes instead. 

Speaking to Accountants Daily, Wong highlighted the major challenges facing small and family businesses due to constant change. 

“The profession is already stretched, and demand for this work concentrates around 30 June each year to avoid split accounting periods,” Wong said. 

“Arrangements entered into in good faith now feel unsettled – a perception compounded by the capital gains tax and negative gearing changes announced at the same time.” 

The accounting body further expressed apprehension that critical components remain unsettled, even as the intended 1 July 2027 start date looms, imposing avoidable strain on both taxpayers and the accounting profession. 

"Taxpayers and advisers need the full picture well ahead of time; businesses cannot make informed decisions if critical elements are unclear, such as the interaction with CGT rollovers and similar concessions, tax consolidated groups and the treatment of temporary residents," Wong said.  

Although acknowledging the proposed CGT apportionment method as a viable substitute for formal valuations, Wong cautioned that the mechanism might fail to mirror the actual value fluctuations of assets across their ownership period. 

"Allowing a formula-based split instead of requiring a formal valuation of every affected property and unlisted asset at 30 June 2027 is a sensible way to hold down compliance costs for millions of taxpayers,” she said. 

CPA Australia has urged the ATO to release calculators, guidance material and record-keeping requirements well before commencement. 

“We support giving people an alternative to a costly formal valuation. But for that choice to be real, taxpayers need to know what valuation evidence the ATO will accept and that’s the missing piece of the puzzle,” Wong said.

CPA Australia welcomed changes that extend the period during which a dwelling can be treated as "new" from 12 to 24 months, describing the measure as a practical improvement that better reflects how developments are built and sold. 

“The definition appropriately focuses on dwellings that genuinely add to housing supply, but the anti-avoidance rule is broad and self-executing,” Wong said.

“It applies where obtaining a tax benefit is merely one purpose, not necessarily the dominant purpose, and automatically removes access to the concession.” 

CPA Australia also raised concerns about the cumulative impact of the budget tax changes to CGT, negative gearing, and discretionary trusts, together with other substantial reforms happening at once, including Payday Super, anti-money laundering and counter-terrorism financing obligations, and a raft of other tax changes. 

"Accountants, tax advisers, lawyers and valuers are already operating under significant pressure,” Wong said.

“This reform is also a practical test of the government's own productivity and red-tape reduction agenda.”