Small to medium-sized entities (SMEs) have for some time identified the complexity of the taxation system and the cost of compliance associated with it as one of their main concerns.  
 
The Institute has long advocated for simplification of tax laws and easing of the compliance burden for SMEs. Its latest work in this area is a report produced jointly with Deloitte and released on April 30. The report aims to generate debate on solutions to complexity and compliance costs associated with the current tax systems for SMEs by proposing an Entity Flow-through taxation regime. 
 
The EFT regime treats SMEs as partnerships; that is, ignores the operating entity and taxes the profits in the hands of the owners of the business. Under this regime, there would be no need for integrity measures such as Division 7A, carry-forward company loss provisions, fringe benefit tax provisions, the consolidation regime, family trust election provisions, trust loss provisions or franking credit rules.  
 
The regime also provides an alternative to the use of trusts, and the significant complexity and integrity issues associated with them. 
 
The Institute intends to use the Entity flow-through submission to work with the government and other stakeholders to develop appropriate solutions. 
 
Relevant Links: 
 
View a full copy of the report - Entity flow-through submission.