COVID-19 changed the shape of business in Australia in many ways, but are regulations keeping up?

Australia’s 2022 federal budget, due on 29 March, is an opportunity for the government to enact previously announced reforms, overhaul outdated regulations and introduce measures that boost post-pandemic recovery.

However, with a May election looming, substantive reform may not be at the top of the government’s list.

Here, Acuity asks CA ANZ policy leaders what areas they think need urgent attention.

Update Australia’s tax laws to reflect the digital economy

COVID-19 fast-tracked the pace of digital transformation in Australia, with companies of all sizes relying on technology to help keep the wheels turning.

But Australia’s tax system was designed around physical goods and services and full-time employment, which seems at odds with the digital economy and modern ways of working.

“There’s a need to look at the tax system to make sure that it’s appropriate,” says Susan Franks, a senior tax advocate at CA ANZ.

“The OECD has been discussing for a number of years the tax challenges associated with digitalisation of the economy. We're now getting to the pointy end of the Base Erosion and Profit Shifting (BEPS) program which affects the big end of town.

“The Board of Tax has also considered how the tax residency of companies need changing due to digitalisation and the government has accepted those recommendations.

“The Australian government needs to allocate extra funding to Treasury and the Australian Taxation Office to support the successful implementation of pillar one and pillar two of BEPS and to draft the new tax residency rules for companies,” she adds.

Make tax calculation and payment easier

The smaller end of town has also gone digital. Data from the federal government’s Digital Economy Strategy 2030 shows that Australia’s small to medium enterprises (SMEs) achieved more growth in web presence, use of digital payroll tools, and use of digital stock control processes in one year of the pandemic than the previous 10 years combined. There was also a growth in the number of small businesses during COVID.

“The government needs to look at things like the pay-as-you-go instalment system to try and make it easier for small business to actually calculate and remit their tax,” says Franks.

Picture: Susan Franks, CA ANZ senior tax advocate.

“The government needs to look at things like the pay-as-you-go instalment system to try and make it easier for small business to actually calculate and remit their tax”

“It also needs to look at how employees can calculate their tax deductions, especially with the hybrid working model expected to become the norm.”

The ATO introduced the temporary shortcut method from 1 March 2020 due to the increased number of employees working from home. Taxpayers could claim 80 cents per work hour for additional running expenses, and the use of this method has been extended to the end of June this year.

“With more and more people working from home, we should look at making this permanent,” says Franks.

“Another way to calculate working-from-home expenses is to claim 52 cents per hour and also claim the work portion of phone/internet expenses, but to use this method you need to have a home office. But times have changed and people can work on their laptops from any room of the house; the requirement to have a home office needs to reconsidered.”

Streamline regulations for financial advisers and accountants

Since the pandemic, SMEs have relied on their accountants more than ever. On top of their regular compliance and advisory services, accountants have been crucial in helping clients access COVID assistance and keep up with changing regulations.

“Our members have never been busier, but there’s quite a lot of regulation associated with being an accountant. Members in the financial advice area, in particular, are feeling the impact,” says Bronny Speed FCA, financial advice leader at CA ANZ.

“The cost of complying with regulations and the additional educational CPD and Code of Ethics requirements are driving many of them out of the financial advice side of their of business.

Picture: Bronny Speed FCA, CA ANZ financial advice leader.

“The cost of complying with regulations and the additional educational CPD and Code of Ethics requirements are driving many of them out of the financial advice side of their of business.”

“This is coming at a time when small businesses and individuals are in great need of quality financial advice,” Speed says.

“We certainly recommend that the government urgently reform the regulatory frameworks for licensed financial advisers.”

Reduce ASIC levies on liquidators

Liquidators are also under increasing pressure, says Karen McWilliams FCA, CA ANZ business reform leader, and CA ANZ is advocating for the government to provide more relief from ASIC levies.

“During COVID, the government changed many of the requirements associated with insolvency,” she says. “This meant that businesses that were barely hanging on because of COVID were given time to try and trade through the height of the pandemic, with creditors unable to commence recovery of debts.

“As a result, registered liquidators have experienced a fall of over 60% in their business, yet levies payable to ASIC under the Industry Funding Model (IFM) have increased.

“What is worse is that the amount of the levy is not known until after the close of a financial year, meaning registered liquidators can only estimate the cost in their budgets.

“With over 50% of registered liquidators being small businesses and revenue decreasing by over 60%, even keeping levies at the same level can be devastating for a small business.

Picture: Karen McWilliams FCA, CA ANZ business reform leader.

“But we also want cost recovery by ASIC to be looked at more generally,” McWilliams continues. “We’ve been concerned about this for some time, because while ASIC is required to recover costs from its regulated population, those who are regulated are not necessarily the ones who are generating these costs.

“It doesn’t matter if you’re a good operator or a bad operator, you’re getting hit with the same levy.”

Franks adds that: “It’s time to review the regulatory environment that’s impacting accountants as well as their clients.

“COVID-19 has changed everything, so we need to ensure regulations remain fit for purpose.”

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