Currently, businesses with less than $10m in annual aggregate turnover have been entitled to a two-year amendment period unless they have fallen foul of anti-avoidance provisions, have deemed dividends under Division 7A, or non-arm’s length transactions with related parties.   

But in a Treasury proposal, the number of catches that prevent entities from having access to that amendment period would almost double. 

These items include earning foreign sourced income, accessing certain capital gains tax (CGT) rollovers, engaging in tax schemes, claiming an R&D offset or being connected with 10 or more other entities. 

“This goes too far, and isn’t consistent with this year’s budget announcement,” said CA ANZ Senior Tax Advocate Susan Franks  

“The March 2022 Budget announcement implied that these additional measures would target medium, rather than smaller sized businesses.” 

“A series of dot points that related to business entities with a turnover of between $10 and $50 million stated that those with significant international dealings or particularly complex affairs would be excluded from accessing the 2-year amendment period. 

“Australia has an underlying cash deficit of almost $80 billion dollars, so we need a level playing field for honest businesses to survive and thrive.  

“Under this proposal, many small businesses are going to lose the certainty of a 2-year amendment due to the small business entity threshold being increased to $50M, which would allow medium sized entities to access the shorter amendment period which was designed for small businesses.  

Integrity Wealth Director Samara Badgery FCA agreed, saying, “At a time when small businesses need support, this change has the potential to wrap them in more red tape."   

Further, ATO research indicated a discrepancy between the issue, and the proposed solution. 

“ATO research shows that international transactions and CGT rollover relief isn’t causing the tax gap at a small business level.  In fact, those issues are contributing to the tax gap at a medium business level, which indicates that the additional exclusions to the 2-year amendment period may be more appropriate for medium-sized businesses, not small businesses,” continued Ms Franks. 

“We think it’s only fair that the Government publicly explains why they’re proposing these restrictions on small business.”