House of Representatives

Tax Laws Amendment (Small Business Measures) Bill 2004

Second Reading Speech

Mr Brough (Longman - Minister for Revenue and Assistant Treasurer)

I move:

That this bill be now read a second time.

The Treasurer announced a package of taxation measures in the 2004-05 budget aimed at reducing compliance costs for small business and providing greater flexibility to taxpayers in managing their affairs. The package included three initiatives aimed at reducing GST compliance costs for small businesses.

This bill, similar in its terms to the Indirect Tax Legislation Amendment (Small Business Measures) Bill 2004 which lapsed when parliament was prorogued for the last election, amends the GST law to give effect to these measures.

The first measure gives small businesses and nonprofit bodies that are voluntarily registered for the GST the option of reporting and paying GST on an annual basis. Businesses that take up this option will be able to prepare and lodge annual GST returns at the same time as they prepare their annual income tax returns. A business will make a single payment of any GST owing at the time it lodges its returns with the Commissioner of Taxation.

The second initiative gives businesses with an annual turnover of $2 million or less the option to make annual apportionments of input tax credits relating to acquisitions used partly for business, and partly for non-business, purposes. For most of the year, these businesses will disregard non-business use of most of their acquisitions or importations in determining the amount of input tax credit they can claim in their monthly or quarterly GST returns. They will then make a single adjustment after the end of the financial year. Businesses required to determine the extent of non-business use of acquisitions or importations for income tax return purposes will be able to use the same determination for GST purposes.

The third initiative further reduces compliance costs for small businesses by simplifying the election rules relating to the option to pay GST by instalments and to lodge an annual GST return. An eligible business will no longer be required to make and lodge an annual election with the Commissioner of Taxation. Once a valid election has been made it will remain in force until the business chooses to leave the instalment system or it is no longer eligible.

The annual lodgment and annual apportionment initiatives will apply from 1 October 2004 for entities with quarterly tax periods and 1 November 2004 for entities with monthly tax periods. The simplified GST instalment election initiative will apply from 1 July 2005.

Full details of the measures in this bill are contained in the explanatory memorandum.

I commend this bill and present the explanatory memorandum.

Debate (on motion by Mr Bevis) adjourned.