Michelle HammondFollow on twitter www.startupsmart.com.au
New corporate entity on the cards for small business
The Federal Government may consider introducing a new corporate entity specifically for small businesses, which would give them access to some of the benefits that larger companies enjoy.
Chris Jordan, chairman of Treasurer Wayne Swan’s business tax working group, believes the Labor Government should consider introducing a new corporate entity specifically for small businesses.
The new structure would allow small businesses to gain some of the benefits that larger companies enjoy, without red tape and the cost of incorporating.
In the next few weeks, the Council of Small Business of Australia and The Tax Institute are expected to meet with Treasury officials, government and small business to discuss the implications of redefining small business.
According to Jordan, the structure would be “a low-cost, easily maintained entity that allows you to have limited liability but also gives you the ability to have the pass-through attributes as well”.
Jordan told the Australian Financial Review that the new structure would combine the attributes of a company and a partnership, and “might make it easier for the 70% of businesses that are not incorporated”.
The test would be fairer if it combined turnover and number of employees, Jordan said.
Recently appointed Small Business Minister Brendan O’Connor told the AFR he hoped to discuss any new definition of small business “in other areas” outside tax.
“I have an open door to the small business advocates… I will be advocating their interests around the Cabinet table,” he said.
“If they can convince me of a particular reform, then I will seek to convince others.”
COSBOA executive director Peter Strong raised the need for a small business roundtable because of the multitude of regulatory benchmarks faced by small businesses.
Strong points out that regulation associated with workplace relations, occupational health and safety, contract law and even competition policy have different definitions for a small business.
Treasury regards small businesses as those with turnovers of less than $2 million a year, unless they are high-volume, low-margin businesses such as petrol stations.
Under unfair dismissal laws, small businesses are those that employ 15 people or less. But under the Howard government’s Work Choices laws, small businesses were those that employed 100 people or less.
Robert Jeremenko, senior tax counsel at The Tax Institute, believes the idea of a new small business entity is worth exploring.
The Tax Institute also supports raising the small business threshold to $5 million, which would capture more businesses.