We try very hard to not get “political” when advising our Clients.  And that is not about to change.  But some of the recent announcements coming out of the 2013 Federal Election campaigns really are making us nervous for the future of Australia, and in particular the future of our small business and private investor clients.
On Friday the 23rd of August, Kevin Rudd announced his plan, if re-elected, to reduce the frequency of Activity Statement lodgements for small business from quarterly to annually (You can read about his announcement here).  I understand on the face of it that may sound like an appealing idea.  I also understand cynics will say critics like us are just protecting our patch.
But the honest truth is this change is a bad idea, and here is why …
Firstly, we are sorry to say, most small businesses have poor record keeping methodologies and practices (though we are working to change that).  And if most small businesses where honest about it, the main reason they have the record keeping they do, is to comply with their quarterly Activity Statement lodgement requirements.  But the fact the quarterly lodgements forces them to maintain their record keeping on a regular basis throughout the year is a very good thing.  It means they at least come close to staying on top of things, rather than letting it build up too long and getting out of control.  It also means they are forced to consider their business’ performance regularly, like it or not, and that allows them to make better decisions about the ongoing management of their business.  Having sound record keeping, and maintaining it on a regular basis, is the only way to manage your business properly and the removal of this incentive would be a major negative for many small businesses.
Secondly, similarly, most small businesses already struggle with meeting their tax payment obligations as things stand.  The cash flow management required is not easy.  We have many forward thinking small business clients that voluntarily choose to lodge their Activity Statements with the ATO every month, rather than every quarter, as it makes things easier to manage when it comes to paying their obligations.  If small businesses who are not as well organised and disciplined are given the chance to put off paying their GST until the end of the year, it is almost guaranteed that they will have a “good” first 12 months, and then they will find themselves in a very big hole, with a very big tax debt hanging over their heads that they can’t afford to pay.
In the above article Opposition small business spokesman Bruce Billson is quoted as stating … “The Coalition will not be matching the BAS commitment.  Most business are operating on automated systems, the instalment paperwork is relatively modest.  It’s certainly a nuisance for some but it’s far less of a concern than an enormous bill shock at the end of the year, after having to do a year’s worth of paperwork at the end of that year, rather than do it in stages throughout the year.”
Mr Billson is right, and we are sorry to repeat ourselves, but the idea is a bad one!