By Patricia Karvelas

June 11, 2008 12:00am

SMALL business owners could be given the option of being taxed as individuals instead of as companies to cut compliance costs and red tape under a proposal the Rudd Government is considering.

Small Business Minister Craig Emerson said the Government would consider new measures designed to spare small businesses the tax paperwork burdens faced by big companies, The Australian reported.

The Institute of Chartered Accountants and Deloitte have proposed that small businesses go through the same tax process as individuals, and have their tax rate based on how much they earn.

“The Government has decided to refer the flow-through proposal to the review of Australia’s Future Tax System headed by Treasury secretary Ken Henry,” Dr Emerson said.

“The flow-through regime is proposed as an option for small companies and unit trusts with five or fewer shareholders wanting to reduce their compliance costs associated with understanding and accounting for different types of financial flows from the entity to its owners.

“I know the institute believes this regime will reduce the tax compliance burden associated with incorporation and unit trusts while maintaining the non-tax benefits of company and trust structures.”

The Government has also decided to refer the BAS Easy option for simplifying GST book-keeping for small business to the Board of Taxation chaired by Dick Warburton as part of the board’s review of the legal framework for the GST.

Dr Emerson said compliance with GST requirements remained the greatest administrative burden for small business.

“This is yet another example of the Government getting out of the way and restoring incentive by pulling away unnecessary red tape that is choking small businesses,” he said.

“Responsible tax reform proposals must maintain the integrity of the system and meet theprinciples of economic efficiency”.

Council of Small Business of Australia chairman Bob Stanton last night warned that the Government must listen to small business or face its wrath, as the Howard government did.

“The now Opposition have seen first hand what can happen to a sitting government when they ignore the might of small business,” he said in a speech at the opening dinner of The National Small Business Summit.

“Fran Bailey, the immediate past minister for small business, must be wondering how many small business owners in her electorate did not vote for her. And why didn’t they vote for the sitting minister for small business? Because the government failed to listen to them.

Because the government failed to recognise they were individuals wanting the respect they so richly deserve.”

Ms Bailey went from having a 6.5 per cent margin in McEwen before last November’s election to retaining it by just 12 votes after a recount.

Mr Stanton called on Kevin Rudd to set a new level of government support for small business and include the Small Business Minister in cabinet.

“He can then have his Government undertake a substantive study into laws from other countries that protect the rights of their small business communities,” he said. “He can have a decent discussion on the future of small business.”

Tags: Small Business, Taxation