House of Representatives

Tax Laws Amendment (Simplified GST Accounting) Bill 2007

Second Reading Speech

Mr Dutton (Minister for Revenue and Assistant Treasurer)

I move:

That this bill be now read a second time.

This bill amends the A New Tax System (Goods and Services Tax) Act 1999 to extend simplified accounting methods to more small businesses.

As part of the 2007-2008 budget, the Australian government announced a package of measures to make it easier for small businesses to meet their GST obligations. The measures include: increasing the GST registration turnover threshold for businesses to $75,000 and increasing the GST-exclusive threshold to $75 before businesses will need to obtain a tax invoice to claim an input tax credit for purchases.

In addition to those changes, the amendments in this bill deliver on the government's commitment in the budget to expand existing simplified accounting arrangements for GST to reduce red tape and compliance costs for Australian small businesses.

Small businesses make a substantial contribution to our economy and to Australia and are a vital source of jobs, exports and innovation. The Australian government is firmly committed to ensuring that enterprising Australians can create a business and prosper. As part of this commitment to helping the small business sector, the Australian government is streamlining and reducing business compliance costs as much as possible, including assisting businesses to comply with their GST obligations.

Since GST began in July 2000 the GST law has enabled the Commissioner of Taxation to offer simplified accounting methods for use by eligible businesses. Over time, the availability of simplified accounting methods for GST has been extended to include a wider range of eligible small businesses. Simplified accounting methods are currently available for eligible food retailers, including supermarkets, convenience stores, restaurants, cafes and caterers.

This bill amends the GST law to extend the existing range of entities for which the Commissioner of Taxation can determine simplified accounting methods. From 1 July 2007, the Commissioner of Taxation will be able to determine, in writing, simplified accounting methods for businesses, or other entities such as charities, that have an annual turnover of less than $2 million and that make either a mix of taxable and GST-free supplies, or that have acquisitions of taxable supplies and GST-free supplies.

With small businesses making up 95 percent of all Australian businesses, this bill ensures that more small businesses in Australia will be able to benefit from applying a GST simplified accounting method to reduce their GST compliance costs. In particular, some of the types of businesses that are expected to benefit from this initiative include small businesses that export goods or services, optometrists, retirement village operators, child-care operators, chemists, educational institutions, travel agents, suppliers of medical appliances and health supplement retailers.

Small businesses will be able to approach the Commissioner of Taxation to use a simplified GST accounting method and potentially apply a single ratio to their total sales or total purchases. That is, under the additional simplified accounting methods, businesses with an annual turnover of less than $2 million will be able to determine their GST liability by applying a ratio to their total supplies to establish the proportion of taxable supplies to GST-free supplies. The same method would be applied to total purchases to establish the proportion of taxable purchases compared to those that are GST-free.

This bill implements positive improvements to Australia's taxation system. Full details of the measures in the bill are contained in the explanatory memorandum.