Six ways to reduce tax red tape and boost business productivity

Australia’s largest accounting body, CPA Australia, has lodged a comprehensive submission to the Board of Taxation’s Red Tape Reduction Review highlighting the urgent need to simplify Australia’s tax system, reduce compliance costs and foster a more productive business environment.

“Complexity in the tax system is a significant barrier to productivity and growth for Australian businesses, both large and small,” said Jenny Wong, CPA Australia Tax Lead. 

“Our members consistently report that red tape diverts resources from core business activities and innovation, while presenting a significant compliance cost.

“We are therefore urging the government to take decisive action to streamline tax administration, reduce duplication and create a more supportive environment for investment and entrepreneurship.”

CPA Australia’s submission to the Board of Taxation includes three key recommendations for large businesses and three for small businesses.

Recommendations for large businesses

1. Streamline overlapping international tax reporting

Large businesses face a proliferation of uncoordinated international tax reporting obligations, including Country-by-Country Reporting, Reportable Tax Position schedules, International Dealings Schedules, new Pillar Two reporting obligations and transfer pricing documentation. These overlapping requirements result in duplicated disclosures, excessive granularity and significant compliance costs.

CPA Australia recommends streamlining reporting to the minimum necessary, adopting a risk-based audit approach, leveraging digital tools, and instituting regular reviews of the compliance framework to ensure efficiency and reduce unnecessary duplication. 

2. Simplify multiple layers of tax integrity rules

The layering of integrity measures – such as the Multinational Anti-Avoidance Law, hybrid mismatch rules, thin capitalisation and general anti-avoidance provisions – creates legal and administrative uncertainty for multinational businesses. This is further compounded by rushed legislative changes and inadequate consultation.

CPA Australia calls for improved legislative co-design, automatic post-implementation reviews, and a reassessment of overlapping rules in light of global developments, to reduce uncertainty and compliance costs.

3. Comprehensive simplification of Fringe Benefits Tax (FBT)

The FBT regime is one of the most burdensome aspects of the tax system, with compliance costs far outweighing revenue generated. The complexity of identifying, categorising and valuing benefits imposes disproportionate obligations on employers.

CPA Australia urges the government to prioritise FBT simplification, including the introduction of grouping provisions, substituted accounting periods and flat-rate or standard-value methodologies for common, low-risk benefits. 

Recommendations for small businesses

1. Improve flexibility of Family Trust Elections

Family trusts are a cornerstone for many small and medium-sized businesses, but the current rules around Family Trust Elections are excessively rigid, leading to inadvertent compliance traps and severe penalties for genuine administrative errors.

CPA Australia recommends legislative amendments to allow correction of genuine errors, provide the ATO with limited discretion to remit penalties where no tax avoidance has occurred, and impose statutory limits on revisiting historical liabilities. 

2. Simplify FBT 

Small businesses face disproportionately high compliance costs in meeting FBT obligations, even for low-value, low-risk benefits. The burden often discourages the provision of basic employee perks.
CPA Australia proposes an optional simplified FBT framework for small businesses, including a higher minor-benefits threshold, simplified record-keeping, and optional flat-rate methods for common benefits.

3. Establish a small business ‘Fix-It Squad’

Red tape issues for small businesses often persist due to inconsistent cross-agency coordination. There is currently no structured mechanism to address these issues in a timely, solution-focused manner.

CPA Australia recommends reviving a small business Fix-It Squad – a joint taskforce of Treasury, ATO, ASIC and other agencies – to identify and rapidly resolve red tape issues through targeted, time-bound projects and engagement with stakeholders. 

“Cutting tax red tape is not just about quick wins, it’s about creating a roadmap for sustained improvement,” Ms Wong said. “By reducing unnecessary complexity and compliance costs, Australia can unlock productivity, attract investment and support the success of businesses of all sizes.”

Ms Wong added that while major reform may be outside the scope of the Red Tape Reduction Review, it’s important that government does not lose sight of opportunities for longer-term, structural improvements.

“Quick wins are valuable, but a balanced approach requires both immediate fixes and a clear roadmap for more substantial reforms that will deliver sustained reductions in red tape and lasting productivity gains for Australian businesses,” she said.

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Simon Downes, External Affairs Lead
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