COSBOA welcomes Coalition’s $20k tax deduction proposal

Groups such as the Council of Small Business Organisations Australia have voiced their support for the $20,000 small business tax deduction proposed by the Coalition but others have warned it could create complexity.

Leader of the opposition, Peter Dutton, announced on Sunday (20 January) that if elected, the Coalition would look to introduce a capped tax deduction of $20,000 for business-related meal and entertainment expenses.

The deduction would be available to small businesses with a turnover of up to $10 million with alcohol excluded from the policy. The measure would run for an initial two years and be exempt from Fringe Benefits Tax.

Dutton said the proposed deduction would offer include dual benefits.

“This is a win for small businesses spending the money on their staff or clients, and a win for the hospitality venues who will see an increased spend in their businesses. It will help businesses recover from a horrible period under three years of Labor,” he said.

The Coalition noted that small businesses were a huge part of the economy and needed to be supported and looked after to supplement the economy, the community and workers.

The Institute of Public Accountants general manager of technical policy Tony Greco said the proposed tax deduction sounded promising for SMEs; however, the rule around entertainment was one clear example of the myriad of hoops to be navigated.

Greco noted the exemption from FBT was an interesting point as it was a 'bugbear' for any business to comply with its outdated rules and could have the potential of becoming a nightmare for tax practitioners.

“Whilst the announcement sounds good, it creates another exception to the myriad of rules already existing,” he said.

“It’s just not just about FBT as you need to understand the interaction of the FBT rules with income tax and GST. There are long winded tables showing when meal entertainment is subject to FBT and whether it is deductible and when a GST input tax is allowable.”

“It’s a dog’s breakfast of interactions which can trip even the most seasoned practitioner trying to comply with the rules.”

COSBOA CEO Luke Achterstraat said the announcement came at a critical time for hospitality and would provide a real ‘shot in the arm’ for small businesses facing a tough operating environment.

“With record insolvencies and higher costs facing small businesses, we need to inject as much confidence as possible and induce people back into restaurants, cafes, shows and experiences,” he said.

“If you want more of something, then you should tax it less. This tax deduction will encourage people to back their local hospitality businesses by providing a real financial incentive to do so.”

“We hope to see many small businesses utilise the potential scheme to reward their hardworking employees and to engage with their clients to strengthen relationships.”

COSBOA also noted the proposed deduction would reduce red tape for small businesses and avoid duplication with navigating the fringe benefits tax system.

Based on the current complexity of the regulatory environment, it would be better for small businesses if there was less time spent on duplicating paperwork, according to the SME body.

Achterstraat said the Australian small business community was looking for leadership from major parties this year with the looming election.

“This targeted initiative is welcome and we look forward to seeing small businesses play a central role in the election. There are 2.5 million small business owners in Australia all with a vote; many are at a crossroads and will be watching this election closely,” he said.

“Without significant support for the engine room of the economy, our economy will see fewer businesses operating, reduced competition, productivity, and be stuck with higher prices for longer.”

COSBOA said if the opposition was elected and this deduction was enforced, it would empower small businesses to focus on their core business and “do what they do best” in delighting customers and investing in staff.

Shadow treasurer Angus Taylor said he believed small businesses would always be ‘better off’ under a Coalition government.

“This is a fiscally responsible down payment on our commitment to lower, simpler, fairer taxes and rebuilding Australian businesses,” Taylor said.

“It builds on our commitment to rebuild small business by making the Instant Asset Write Off permanent, saving more than 98 per cent of businesses the hassle of dealing with depreciation schedules when they invest in their businesses.”