Leading accountant finds ATO falls short on SME education

Speaking to Public Accountant, Duca Advisors founding director Daniel Moore said the onus shouldn’t fall on accountants to educate SMEs around their obligations when holding an Australian Business Number (ABN).

He said many people go out and get an ABN and start working straight away with no idea as to their tax obligations and fall into trouble when they’re found out 18 months down the track.

“Then they've got all these questions, or 12 months down the track they've earned $150,000 and they owe a whole massive amount of tax. They've made money and they've spent it and they haven't paid a single cent in tax or GST. It's really hard for a business to recover from that,” Mr Moore said.

“They may have had a great financial year, but you owe $30,000 in tax that year. Then that means in year two they've got to pay double tax – last year's and this year's tax.

“It then falls on the accountant to fix that up and they're the one that gets told, 'Why didn't I know about this earlier?'. It creates a disconnection – an asymmetry of information.”

Mr Moore suggested that if people apply for an ABN, it should be mandatory that they undertake a two-hour ‘TAFE-like’ program where they can attain a general understanding of their obligations as a small business owner.

“The ATO needs to at least tell new ABN applicants that and say this will be validated once you turn up for a one-afternoon presentation at your local TAFE institution,” Mr Moore said.

“It can even be online, and they can answer 10 questions at the end of the presentation. Their ABN can be now activated once they’ve answered the questions and know their obligations about GST, their tax liabilities and what a tax return is. It shows that they've paid attention.”