New concession could have 'Reaganomics effect' for SMEs
A prominent accounting voice has urged the government to consider extending the GST cash accounting concession for small businesses to include income tax, saying it will help improve cash flow.
Since 1 July 2016, small businesses with an annual turnover of less than $10 million have been able to account for GST on a cash basis.
Immediate past president of the NSW Business Chamber, Tony Dormer, praised the previous measures but believes extending the concession to cover income tax would open up a “Reaganomics” effect on the national economy.
“Not every business gets access to the concession from an income tax point of view which is really not effective because for example, a manufacturer who has stock and debtors has not got access to the income tax cash provisions at any level of turnover which is really sad,” Mr Dormer said.
“The income tax cash basis provision should be amended to provide all small businesses up to $2 million to pay tax on a cash basis and then $5 million and then $10 million over time.
“If we could have that on a cash basis, small business would expand by putting that money into stock, use that tax money to put more into inventory, to put more into wages, to put more into growing the business and so I think the Reaganomics effect on it would be increased economic activity and a better economy in Australia.”
Mr Dormer, director of Tricor Chew and Dormers, said he has lobbied to the Minister for Small Business Michael McCormack, who replied saying it was “on the radar”.
“The government doesn't lose money; it's just extending that timing for businesses so they've got more working capital,” added Mr Dormer.
“Cash flow would be one thing but over the forward estimates of the budget, the impact would not be as significant as the positive impact to small businesses.”