Deepti Paton, tax counsel at The Tax Institute, said the move to monthly payments will increase compliance costs and cause cashflow difficulties in an already difficult economic environment.
“Monthly payments of income tax instalments by large companies represent a mere timing difference that will result in an artificial spike in revenue and deliver minimal long-term benefits,” she says.
“Such tinkering is a missed opportunity for real, necessary tax reform.”
Peter Anderson, chief executive of the Australian Chamber of Commerce and Industry, slammed the changes as “short-term and short-sighted”.
“There is no policy rationale for raising the frequency of company tax,” he said.
“The change is motivated by revenue considerations and threatens to undermine international competitiveness of Australian companies.”
Anderson said the latest blow to business was hard to take following the government’s abandonment in May of its pledge to reduce the corporate tax rate to 29%.
The impact on SMEs
While smaller businesses are not included in the scheme at this stage, Ord says the impact will be felt by SMEs even if their turnover is under $20 million.
“If the larger businesses are under pressure then that will impact on how they pay their suppliers, which is where smaller business gets hit and it flows through the system,” he says.
Peter Strong, chief executive of the Council of Small Business Australia, said it was likely small business will eventually be included in the monthly requirement.
“Although it may be a few years away the idea of forcing small business people to complete monthly tax statements does not reflect the reality of their situations,” he said.
“There are many small businesses that do not turn over a lot of money and forcing them to complete paperwork as often as big business does not reflect the difference between big and small.”
What to do now
Pitcher Partners managing partner John Brazzale said businesses which will be affected need to start now on preparing cashflow forecasts factoring in monthly pay as you go.
“They need to understand what impact this will have on their cash flows, and they need to start to think about what alternative arrangements they need to make by way of additional equity or debt funding,” he said.
