Kevin Rudd’s silliest idea ever?

The Prime Minister Kevin Rudd’s proposal to allow businesses to defer lodgement of their Business Activity Statement from quarterly to annually is a potential recipe for disaster for small businesses.
苏州美甲学校

Currently, to lodge a BAS the business owner has to have all their financial records up to date. Everything they have spent or earned during the quarter needs to be accounted for and allocated and recorded. The actual filling in and lodgement of the BAS form once this has been done takes about 15 minutes.

So the Prime Minister’s proposed policy will do one of two things. It will either save business owners approximately 15 minutes every three months because they no longer have to lodge BAS forms. Or it will encourage them to defer recording of their financial transactions until the end of each year, depriving them of an up-to-date understanding of their financial position.

The Prime Minister’s research apparently suggests that small and medium enterprises spend almost 500 hours a year on their tax obligations. In fact those 500 hours are spent recording and tracking the financial health of their business, which forms an integral part of managing a successful business.

He suggests GST could be paid in instalments throughout the year based on the previous year’s performance. Having processed many hundreds of BAS forms over the past 13 years, I know for the most part the amount businesses pay fluctuates, sometimes considerably, from quarter to quarter.

So any assumptions made about how much GST a business should pay based on the previous quarter’s results are likely to be inaccurate and may result in the business owner paying thousands too much in GST. For the government a couple of thousand dollars here or there might be inconsequential. For a small business owner it is not. It can mean the difference between them being able to pay their rent or staff wages that month.

For most businesses, paying GST in instalments throughout the year based on assumptions on how much revenue they earned would result, at the end of the tax year, in the company having either under or overpaid their GST obligations. If they underpay the end result will be a tax bill they may not be expecting that could have serious cash flow implications. Overpayment could result in serious cash flow issues during the previous year. Since lack of cash flow is the number one killer of small business, guess where that will leave them?

The Prime Minister may say he is not suggesting business owners ignore this side of their business. But all he is in fact offering them is a time saving of 15 minutes per quarter. Hardly a big step in cutting red tape and compliance costs.

Small business is the lifeblood of our economy. And financial management is the lifeblood of small business. As someone who works in the accounting industry I am constantly witness to the results of a business owner who does not understand this side of their operations. Many business owners are creative thinkers and visionaries who at the best of times struggle with the ‘left brain’, more financially-minded side of their enterprise.

The proposal to allow many small businesses to file their BAS just once a year would give them permission and encouragement to ignore it for 11 months of the year. The consequences of doing this could be dire.

Sophie Andrews is a director of bookkeeping and BAS agents The Accounts Studio.

This story Administrator ready to work first appeared on 苏州美甲学校.