Just before the election Joe Hockey issued a press release with the following promise: "The Coalition is committed to delivering lower, fairer and simpler taxes for Australian families and businesses."
The measure of the sincerity of this promise, and whether the government is really interested in a fairer, simpler tax system, will be changes that it makes to tax, employment and Centrelink rules that disadvantage small business owners.
One of the first steps that the Coalition should take would be to finally set in concrete what the definition of a small business is when it comes to government regulations.
The sector has seen this definition range from less than 100 employees, under the Howard government, to less than 15 employees under the Rudd/Gillard governments.
Given that the Labor Party's definition included both full and part-time employees, the two definitions went from the sublime to the ridiculous.
To create certainty the government should tie the definition of a small business to that of the Australian Bureau of Statistics. Under this definition a small business has from 0 to 19 employees. This is the definition that should be adopted for such things as workplace regulations.
The areas in which small businesses are disadvantaged include the Centrelink work bonus and the calculation of reportable employer super contributions. In addition, the GST reporting system could be made simple without a loss of revenue for the government.
The Centrelink work bonus was introduced to encourage people of pension age to continue working by discounting their income so it was not all counted under the income test. Under this bonus the amount earned by a person is decreased by $250 a fortnight.
At present the work bonus only applies to employment income and not income earned by someone running a small business. This means a 66-year-old who is employed by a company to mow lawns and earns $500 a fortnight has only $250 counted under the income test. If that person was running a law-mowing business and earning the $500 as business income, the full amount would be counted by Centrelink as income. This effectively results in $125 a fortnight less in age pension.
The income counted for most government benefits and tax offsets is a person's adjusted taxable income. This is calculated by adding to a person's taxable income reportable fringe benefits, reportable employer super contributions, financial investment losses, rental property losses, tax-free government pensions or benefits, and self-employed super contributions.
Because the full amount contributed by a self-employed person is counted, small business owners are automatically at a disadvantage to people who are employed.Under the current GST system, any business that does not have to register for GST, but chooses to do so, can elect to lodge an annual BAS statement while paying quarterly GST instalments during the year that are estimated by the ATO.
To relieve the administration and paperwork burden on small businesses this ability to lodge one annual BAS should be extended to any business that qualifies as a small business entity.
Whether the Abbott government is really interested in delivering lower, fairer and simpler taxes for business will not be judged by its words, but by its actions.