Accounting body advises caution on incoming SME tax changes
Small businesses are being urged to keep abreast of some key tax changes coming in 2020, with an accounting body warning they “can have a big impact on the way you run your business”.
According to Susan Franks, senior tax advocate at Chartered Accountants Australia and New Zealand (CA ANZ), some of the core changes taking effect this year could be lost on busy business owners.
The first of these changes, Ms Franks said, is the expansion of the taxable payment reporting systems (TPRS).
“Small businesses in certain industries are required to report information to the Australian Taxation Office (ATO) about payments they make to contractors,” she said.
“While TPRS has applied to the building and construction industry for a while, it was extended to cleaners and couriers for the 2018–19 financial year and now has been further extended to road freight, IT, security, investigation or surveillance for the 2019–20 financial year.”
Ms Franks warned that the change even covers services by businesses that may not actually identify as operating within those particular industries.
“For example, if a business provides courier services, even if it’s only part of their services, they now may need to lodge a taxable payments annual report each year and include payments to contractors and subcontractors that provide courier services on their behalf,” she said.
The ATO website notes that businesses supplying “road freight, security, investigation, surveillance or IT services will need to report payments to contractors if the payments are for road freight, security, investigation or IT services”, with the first annual report due to be lodged by 28 August 2020.
More information is available on the ATO website.
AUSkey to be scrapped
Ms Franks noted that from 1 April 2020, the AUSkey system will no longer be used for businesses to report to the ATO.
“AUSkey was a way to send business information to the government online. From 1 April 2020, you will need to use myGovID and Relationship Authorisation Manager (RAM) instead,” she said.
The accountant noted some concerns from the business community about the new system sounding complicated. However, she said that “the ATO says this new process will be a more secure, streamlined and flexible way to report information to the ATO”.
According to the Australian Business Register website, “AUSkey and Manage ABN Connections will continue to be supported while you move to myGovID and RAM”.
It states that access to business services after 31 March will first require businesses to link their ABN to their myGovID using the RAM.
As previously reported, 2020 also marks the start of the federal government’s e-invoicing framework, which includes a commitment to pay electronically supplied invoices from small business suppliers — up to the value of $1 million — within five days, or interest will be applied.
Ms Franks is urging Australian businesses to consider embracing the new system.
“As businesses become more technologically savvy, e-invoicing is becoming the norm anyway,” she said.
“E-invoicing refers to the direct exchange of invoices between a supplier and a buyer’s computer systems.
“According to the ATO, Australian small businesses are owed $26 billion in unpaid invoices and 20 per cent of late payments are due to errors on invoices often associated with manual entry.”
As well as the cash-flow benefits of faster payment times, Ms Franks said businesses should also enjoy a cost saving on processing invoices of around 70 per cent.
“It is estimated that e-invoicing will save the Australian economy $28 billion over 10 years,” she said.
The ATO has said that e-invoicing will not be compulsory for all businesses.
Single Touch Payroll reporting
The rollout of Single Touch Payroll (STP) has been widely covered by My Business since its inception, yet it has been a source of contention and misconceptions among employers, with many readers angry or frustrated by the transition and doubtful that it is even necessary.
Small businesses (those with fewer than 20 employees) were granted a three-month extension to 30 September 2019 to make the transition to the digital reporting platform, and penalties are being waived until 30 June 2020. Penalties already apply for larger employers from the beginning of FY2019–20.
“STP allows employers to send payroll information including wages, salary payments and superannuation to the ATO, at the same time as their usual pay run,” Ms Franks said.
“The intention of STP is to create transparency and guarantee employers are meeting their payroll obligations.”
She noted that there is a deferral for closely held payees — generally family members working within a business — until 1 July 2020 to begin reporting payroll data through STP.
“And you can also choose to report quarterly rather than at the time of [your] usual pay run,” Ms Franks said.
The accountant added: “If you are an existing business which has not yet started STP and does not have an exemption, then expect to be contacted by the ATO.
“The ATO will also be contacting your tax or BAS agent to encourage you to adopt STP. It is best to adopt STP while the ATO is taking a light-touch approach.”
More information on the digital payroll reporting system can be found in the My Business Guide to the Single Touch Payroll system. Common business questions were also answered in a dedicated webcast in May 2019 with the then project lead at the ATO, John Shepherd, and other tax experts.