17 April 2014

Six months after the Coalition government was elected on a platform of helping small and medium enterprises, Australia remains one of the most expensive places to do business in the world.

At a recent national conference of our firms from every state, we found that more than 75 per cent of our professional time is now spent advising on regulatory compliance and tax issues – not on business strategy, planning and innovation.

If we want Australia to be the clever country in Asia, to encourage more start-ups and small business activity and if we want our businesses to develop new smart manufacturing solutions to employ people, then government has to act quickly to lift this burden on growth and productivity.

The view of our business advisers around Australia is that we don't want to spend our time assisting and advising clients on filling out forms or complying with differing regulations, we want to help our clients become more dynamic and competitive.

We have around 4000 small to medium business clients that have all become much leaner since the GFC by cutting costs and increasing efficiencies.

But as the economy has started to improve, these SMEs are now finding that Australia's "culture of compliance" is strangling private enterprise.

The most recent example is the change in PAYG withholding cycles.

From 1 July 2014, clients who withhold from $25,000 up to $1 million, will need to report and pay to the Australian Tax Office monthly. If the amount is more than $1 million, they will be classed as large business and need to report and pay electronically on a weekly basis.

But we would argue that someone managing $1 million in PAYG payments is not a large business. It probably turns over no more than $6 million a year and has less than 30 employees. But it will now need to set aside almost a full time employee equivalent just to manage the PAYG tax cycle.

Small to medium businesses are the engine room of the Australian economy. They are the ones we are looking at to generate new industries and jobs. They are happy to comply with the rules, but they are being penalised by extraordinary levels of red tape and regulation.

A good start by the government would be to put the review of the GST back on the national agenda.

It is 14 years since the GST was introduced with a promise of doing away with all of the other taxes on business – payroll tax, land tax, stamp duty and so on. Yet here we are in 2014 and those taxes are still making it hard for businesses to grow.

We support a broad based taxation environment, which is efficient and equitable and is only paid if you can afford it – when you buy something. In saying this we also support that low income earners should not be disadvantaged.

The other area of urgently needed reform is the regulatory environment, especially in the construction, manufacturing, food and retail sectors.

Employers are spending a large percentage of their week on meeting the demands of non-productive regulation.

We all want to look after our employees but occupational health and safety regulations, workers compensation, superannuation, certification and licensing, not to mention penalty rates and leave provisions, are all adding up to make us one of the least competitive business environments in the world.

We are not just talking about high costs in comparison to the low wage environment of Asia.

William Buck has construction associates in New York who can build commercial properties of an equivalent size for half the cost of Australia – and that is without the land cost.

We are just making it too hard for businesses to operate efficiently and profitably.

The Federal government made its intentions clear during last year's election that it would target regulation and red tape.

But so far most of their reforms have been minor. They are picking the low hanging fruit and cutting insignificant regulations, which most people don't even know exist.

The government should do what it has compelled all small businesses to do during the past few years – create a lean, effective business model to collect taxes and provide the services needed.

Small business is frustrated that every time a new type of tax is introduced, another level of government bureaucracy is created with it.

It is now a matter of urgency that the Federal government addresses these real restraints on Australia's business community.

Nick Hatzistergos is chairman of national chartered accounting and advisory firm, William Buck.