The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 22/02/01

Transcript No. 2001/014

 

 

Transcript

of

Hon. Peter Costello MP
Treasurer

and

Hon. Ian Macfarlane MP
Minister for Small Business

Press Conference

Business Activity Statement

Thursday, 22 February 2001
2.30 pm

E&OE

SUBJECTS: BAS Streamlining, Competition Policy, Qantas, Julie Bishop MP

TREASURER:

Today the Government is announcing some very significant changes to the reporting systems both for the Pay As You Go system and for the GST system. Now this follows the experience of two quarterly returns, extensive consultation with accountants and the business community and were announcing today a package of measures which will very, very dramatically reduce reporting requirements for small business.

These are measures which can in fact relieve those small businesses if they take them up from doing a quarterly return, they need, if they take them up, to only do an annual return in relation to GST. The way in which this is to be introduced is to introduce a new option for those businesses which have an annual turnover of less than $2 million. If you have a turnover less than $2 million you take advantage of this new option.

If you want to stay with the current system, those people that are complying with the current system, there is no need to change. And I would underline that point. For those businesses that have adjusted to the current system and are complying with the current system there is no need to change.

But what we are doing for businesses which have a turnover of $2 million or less is we are giving them the option to switch to a new system. The new system under which their quarterly instalment payments will be based on the previous years return. So if the previous year was a certain amount, uplifted by GDP factor, you will pay quarterly, that amount, and do one annual return to reconcile to the actual GST payable. Now obviously at this stage of the first year of introduction in the year 2000-01, businesses dont yet have an experience of a full years payments, but the Government nonetheless wants to introduce an option which businesses can take advantage of immediately.

So weve decided that those businesses that want to take advantage of this option can for their third and fourth instalments just pay what they paid on their December BAS. They just take the amount that theyve paid on their December BAS which was their second instalment, they pay it for the third and the fourth quarter and then they reconcile to the actual amount with their annual return, and their annual return need be filed at the time of their annual income tax return or the 28 February 2002 whichever happens to be the earlier. So let me stress again this is an option which is being introduced for businesses that have a turnover of $2 million or less. They do not need to file quarterly BAS forms. They can for the next two payments just pay what they paid on their December instalments with an annual return and continue with quarterly payments based on their annual liability for all of the future years. For those businesses that take this option up, that will be a dramatic reduction in compliance burden and it will relieve them of quarterly reporting, not quarterly instalments but quarterly reporting, with one annual return.

I should also say that for all quarterly payers the Government is also extending lodgment dates. Quarterly payments will now become due on 28 July, 28 October, 28 February and 28 April. The 28 February has been put back quite considerably mainly to recognise the fact that people coming back from Christmas or January holidays may need more time if theyre actually staying with the quarterly remittance system.

This is a dramatic simplification. Its come about as a result of consultation with business and accounting groups. Its something that weve discussed with them and they have indicated it would be a very substantial simplification. A good deal of it can be done without legislation and the Commissioner will commence to administer on this basis. That part of it which requires legislation, well be putting the legislation into the Parliament as a matter of urgency to ensure that the legislation is passed by the Parliament by 30 June at the latest or preferably much earlier.

This will be of great benefit for small business. When we set out to reform the tax system we wanted to introduce a system with long term benefits. Theres no point in having a reporting system which for a portion of business is too onerous. The Government has heard from those people whove made positive suggestions about improving it, that it was too onerous, the Government has responded and I believe that this is such a far reaching package that it will really give those businesses that had trouble with the existing quarterly system a real live positive option which will dramatically reduce their compliance costs.

JOURNALIST:

Mr Costello two weeks ago you ridiculed Labors plan for annual lodgement, you said it was too early and you needed to get through the transitional phase, the transitional year, whats changed your mind in the, in that intervening period?

TREASURER:

Well this goes much further than the Labor Party. Lets, lets get that on the record. The Labor Party such as it was, was for two more quarterly returns and then to work off turnover in future years. Weve gone past that. We looked at that and we think we can do much better, in fact we have done much better. We can actually get people onto quarterly instalments from the next instalment. Now there will always be a degree of inaccuracy because youre basing the next instalment on the last. And thats why we dont say everybody should do it. There are some people that will want to actually pay their actual liability and they can continue to do it. But we think that that is the best snapshot in this transitional situation to take. If its not an appropriate snapshot they can still do variations, but it gives us the opportunity to simplify that as from April. And as I said, I, it goes further than any of the arrangements which have been mooted and I think for those businesses that take it up, theyll welcome it.

JOURNALIST:

Treasurer what can new businesses, how do new businesses get into the system? A new business that hasnt lodged for...

TREASURER:

For new businesses that have not existed, they will have to do two quarterly returns just as existing businesses have done two quarterly returns. A new business has no previous experience. Just as every business in Australia had as of 1 July. Thats why it was necessary to do some returns, just as every business from 1 July has now done two returns and can go off the most recent quarter, new businesses which start up in the future will do two quarterly returns and then can go off the second instalment. So they will have open to them precisely what is being open to all existing businesses.

JOURNALIST:

Treasurer, are you satisfied that these changes will meet the concerns of your Backbench?

TREASURER:

Well, Im satisfied that this is the most dramatic reduction that is consistent with running a proper GST tax system. Theyre as simple as any in the world. And I havent heard any proposals that can go further than this, and so I think theyre are some good proposals. I think that from our road testing them with business they have been warmly received. Nobodys really said that they dont go far enough or put some proposal as to how you could go further. So from the business groups that weve spoken to its had a pretty good reception.

JOURNALIST:

Has page two of the BAS system gone? Page two of the statement?

TREASURER:

Well, page two of the statement, Paul, the calculation sheet, was always optional if you were using the accounts derived method. If you want to go to this method where you dont have to file a quarterly return, you dont need page two. In fact, really you dont need any information at all. The Tax Office just tells you an amount to pay and you pay an amount. So if you go to that option which is the fully-fledged option, you dont need page two, in fact you dont need to return anything. What will happen when the system is up and running is a system like this, the Tax Office will write to your business and will say, based on your previous history, which eventually will be a full years history but at the moment is two quarters history, your liability throughout the year will be, say $10,000 of GST - please pay $2,500. And you wont actually do a return. You will pay that amount and then you will do an annual return. If at the annual return your instalments have been greater than the annual return showed, you will get that back, if they are less you will make up the difference, a bit like income tax.

JOURNALIST:

The Governments going to be severely short changed if there is a recession, isnt it? Because the Tax Office is going to, say the economy declined by 2 per cent, thats immediately 2 per cent off the tax taken, isnt it?

TREASURER:

When you are using a GDP factor, if the economy grows by 4 per cent you put them up 4 per cent, and if the economy didnt grow by 4 per cent you would put it up by whatever that was, yes. Back in the old days they used to use a provisional uplift factor, you will recall, it was always 8 per cent. We think that is unfair. We say move it in line with the economy. I think that is a fair way to do it.

JOURNALIST:

Treasurer, can you (inaudible) Treasurys forecasts?

TREASURER:

No, its the actual outcome from the previous year. Theres a formula which says that...

JOURNALIST:

There is a lag.

TREASURER:

Yes, there is a lag. There is a formula which says the GDP in absolute numbers from the last year over the GDP and in the year before.

JOURNALIST:

Treasurer, on a separate issue. Do you have any sympathy with the view put by Mr Anderson yesterday that there needs to be reform of the public interest test and National Competition Policy principles to provide a more sympathetic situation for rural and regional Australia?

TREASURER:

Can I say in relation to competition policy, the first thing is that competition policy is an agreement between six State Governments, two Territory Governments and the Commonwealth. The Competition Agreement, which all of those Governments have come to, sets down the way in which they want to reform the economy and in return, because the reform of the economy increases revenue, the States share in the benefits of the payments. Now, that agreement does actually require the public interest to be looked at. That agreement does actually require adjustment to be looked at. You can argue as to whether in particular cases that has been done successfully or not, but it is part of the agreement. It already is part of the agreement. I make that point. And I think you got to look very carefully at these competition issues. Remember this, the reason we want more competition in the economy is to reduce prices to consumers. Lets have one example - airlines. More competition, the advent of Virgin or Impulse, lower prices to consumers. If you happen to be in Qantas or Ansett you may not like that. But from a Governments point of view we cant sit around and say, you know, we are going to try and run things for the benefit of Qantas and Ansett. Weve got to sit around and say, were going to run things for the benefit of consumers. And so we always try to heighten competition so consumers get lower costs, to always do it in the public interest and where there are people who are affected by that to have adequate adjustments.

JOURNALIST:

Treasurer, as you say, Qantas dont like the competition and are today announcing almost 2,000 job losses, they also dont like the GST. They blame that as one of the factors why they had to shed staff.

TREASURER:

Well, look I havent seen that statement. But Qantas is subject to a lot of competition, thats going to have an effect on their business. Now, I dont resile from the fact for a moment that if new airlines come in and give people cheaper fares and people want to use those cheaper fares then the existing players of Ansett and Qantas will either have to get more competitive or theyll lose customers. And the new players, if I may say so, the new players pay GST the same as Qantas and Ansett. Its not as if Qantas and Ansett are specially singled out. Qantas and Ansett are paying on the same field as the new entrants. The new entrants will probably tell you they are paying on a better field than the new entrants. So I dont think you can say that it is somehow unfair to them because the same tax rules apply to everybody.

JOURNALIST:

Treasurer, back to the changes announced today. Within the last week Employment Services Minister, Tony Abbott has, Im sorry, Employment Minister, Mr Tony Abbott has blamed Treasury officials to some degree for the fact that the forms they put up to you, the system they put up to you, was too complex and has caused trouble for the Government. Do you blame officials, do you blame beauracrats for the design of this?

TREASURER:

Well, look I havent seen those comments, obviously Im not going to comment on them. But, I think, first of all Id like to pay tribute to the work that has been done on this by Mr Ian Macfarlane and by, in fact, a whole range of people. The point is this, you are moving from one system to another system. This is the biggest change we have had in Australia, in economic, in tax terms for one hundred years. You dont do that without making sure that where there are problems theyre fixed. Youve got a problem - you fix it. In moving to this system, compliance for small business became a problem - we fix it. Now, Im not into going around and blaming people, Im into fixing the problem. I think it is a much better thing to do. Im not at this stage interested in saying who should wear what for this, that or the other, Im interested in fixing the problem.

JOURNALIST:

But do you concede, do you make any concession of the view that youve been dragged kicking and screaming to fix the problem?

TREASURER:

Ive been kicking and screaming to fix the problem. I think as people will attest, my ministerial colleagues, over the last weeks and months we have put enormous energy and resources into fixing this problem, enormous energy and resources. Now, you see a problem - you fix it. This became a problem and so it had to be fixed. The fix, I think, is a dramatic simplification, but it had to be carefully worked out and formed. The one thing that I say here is weve got to keep the explanations pretty straight forward, because people are going to say, well you know dont confuse me with too many alternatives here, and so were not. Were saying basically you can stay with the current system. And I want to say that very strongly because a lot of business people have contacted me in the last month and said, we are compliant with the system, whatever you do dont change it on us. And I want to say to those people - were not. The majority of businesses that say we have now complied, dont change it, for those businesses you can continue. But there was a significant group of other business that havent adjusted to the system. What can you do for them? I think we have now introduced one of the simplest mechanisms possible. When its up and running those people will get from the Tax Office the amount they have to pay, and they pay that on a quarterly basis, they do one annual return, they get credit for all of their quarterly payments and they settle up on the basis of their annual return. I dont think you can have a system anywhere in the world that is more straight forward than that.

JOURNALIST:

Treasurer, the Tax Office has said that, the Tax Office has argued that the BAS takes 2 quarterly payments were vital, if you like, to the integrity of the tax system. Arent you undermining their audit programme by allowing annual lodgement?

TREASURER:

You are still going to have quarterly payments. We have got to...

JOURNALIST:

Inaudible

TREASURER:

We have got to draw a distinction between quarterly payment and quarterly return. We are still on quarterly payment but if you take this option the quarterly payment is going to be a quarter of your annual liability.

JOURNALIST:

Mr Carmody argued that he needed that data in the system so that they could properly audit the business community. You have taken that away from him?

TREASURER:

No. At the end of the year, at the end of the year, you get the annual return and it is the annual return which will have to show the actual GST. Its going to be like, very much like, the way in which the old quarterly system of income tax worked. You were, if you were on quarterly payments of income tax, you payed quarterly, you put in a return, you have got all of the information and to the degree that audits are required, you can do that off the annual return.

JOURNALIST:

So you dont concede that the integrity of the tax system has been compromised by these changes?

TREASURER:

No.

JOURNALIST:

Mr Carmody would argue otherwise.

TREASURER:

Well, he has never argued that to me, in fact...

JOURNALIST:

(inaudible)... he has said publicly. In Senate estimates and...

TREASURER:

Well, in fact...

JOURNALIST:

...(inaudible)Senate estimates...

TREASURER:

Well, I dont want to interrupt you.

JOURNALIST:

You, dont concede that , despite what the Tax Office has said publicly, that there is any undermining of the integrity of the tax system by these changes?

TREASURER:

No. You asked me about Mr Carmody and I was about to answer, and I think I have spent the last two days almost continuously with Mr Carmody, running this past Mr Carmody, and Mr Carmody has advised me that he believes this is very workable and will not threaten the integrity of the tax system. So, if your question to me is, will this threaten the integrity of the tax system - my answer is no. Does Mr Carmody believe it will - my answer is no. That is what he said to me.

JOURNALIST:

Mr Costello, just on an another (inaudible), what sort of Liberal leader do you think Julie Bishop will make in Western Australia? And what do you think of her (inaudible)?

TREASURER:

Look, I have a very high opinion of Julie Bishop. I think Julie is intelligent. I think she is very articulate and I think she makes a good Federal Member. And as far as I am aware, that is the only position she currently holds and I would love to continue to serve with her. I read in the newspapers about other things, I have no independent knowledge of them and I dont advise her on those. But I would say to Julie, you know, its a lot of fun around here.

JOURNALIST:

That sounds like you are urging her to, some sort of advice, not to take it up?

TREASURER:

I have given up giving people advice. You know, really, what am I? I am the Treasurer. The only people really qualified to give advice, I have found, are journalists...

JOURNALIST:

Treasurer, is this the last word?

TREASURER:

...who in my experience are qualified to give advice on everything, and in fact they are so qualified they can change it on a day by day basis, and its right on both days.

JOURNALIST:

Treasurer, is this the last word, or are you open to further changes if necessary?

TREASURER:

Look, this is, this is a proposal for dramatic simplification. And I think, for those companies that want to take it up, will relieve them of all of the paperwork burden that they were complaining about. And I dont think, if they go into that system, you can find a simpler way of doing it. I really dont believe you can find a simpler way of doing it. Now, they can stay in the current system, and I want to make that absolutely clear, but we dont want to have too many alternatives running out there because I think you can actually confuse people. Look, we are always willing to knock rough edges off, but from a design point of view this is a very good stream-line, straight design.

JOURNALIST:

(inaudible)..the current system?

TREASURER:

How many businesses....well, I have...both say....sorry...yes?

JOURNALIST:

Do you think most businesses will stay in the current system and will there be any (inaudible)...simplifications?

TREASURER:

Well, this kind of brings me back to the question here. The number of businesses that have a turn-over of $2 million or less is up around 92, 93 per cent of Australian businesses. So 92, 93 per cent of Australian businesses would be eligible to take this option. From the feedback that we are getting about the number of businesses that are fully complying and happy with the current system - it is the majority. So, if the majority are happy with the current system we would expect them to stay with the current system. But 92 per cent are eligible to take this out. Now, I dont see any threat to the integrity on this basis; that under this system they pay quarterly and you do an annual reconcilliation. If they have under-paid they have to pay a bit more in the next year, if they have over-paid they have to pay a bit less in the next year. So, depending on how that works out you can have some small movement from one year to the next. But if your system works properly, it should not lead to a dollar more or a dollar less, once you average between the years. You might have one-off effects, small one-off effects. So, youre asking me how many will take advantage? I... 92 per cent are eligible to take advantage. Its up to them, but I would think that the kind of people that have adjusted to the new system, and they keep putting in their quarterlies, they dont have to do an annual return. If you keep putting in your quarterly, you dont have to do an annual return. But if you dont put in a quarterly you have got to do an annual return. I think some people will stay with the current system.

JOURNALIST:

Can I ask Mr Macfarlane a question Treasurer? Just one question?

TREASURER:

Well, I have closed the Press Conference on several occasions, but I will give him the last word.

JOURNALIST:

Just one question, Small Business Minister. Does this restore the Howard Governments promise made, in the 1996 election, to cut red-tape for business by at least 50 per cent.

MAcFARLANE:

It certainly dramatically cuts red-tape for small business.

TREASURER:

Thank you all very much. Thank you.