Small businesses face 'bottleneck' under sweeping tax changes, CPA Australia warns

• More details emerge on CGT and negative gearing, risking compliance burden
• Greater clarity for CGT apportionment method needed
• Too much change at once may limit small business access to professional advice

CPA Australia has welcomed the Federal Government's ongoing consultation on its Tranche 3 tax reform legislation but warns that taxpayers, small businesses and advisers are still left with significant uncertainty, complexity and compliance costs as details of the reforms continue to trickle out.

CPA Australia Tax Lead Jenny Wong said the latest consultation contains some compliance relief improvements and practical measures, but they are only one element of a reform package that will fundamentally reshape Australia’s property and capital gains tax settings.

"We are now dealing with the most significant overhaul of property and capital gains tax in a generation, and complexity and compliance cost remain the central issue for taxpayers and their advisers,” Ms Wong said.

Ms Wong said small businesses need certainty and simplicity, not a growing pipeline of highly technical and overlapping reforms.

"Tax reform should support productivity, jobs, investment and business confidence. Instead, many small businesses are facing an increasingly complicated operating environment, with more red tape, more compliance obligations and rising costs.

"The Government has rightly identified productivity and reducing red tape as national priorities. These reforms will ultimately be judged by whether they make life easier or harder for the millions of Australians trying to run businesses, invest and comply with their tax obligations."

CPA Australia is concerned that key elements are still unresolved despite the proposed commencement date of 1 July 2027 placing unnecessary pressure on taxpayers and their accountants.

"Taxpayers and advisers need the full picture well ahead of time. Businesses cannot make informed decisions if critical elements are unclear, such as the interaction with CGT rollovers and similar concessions, tax consolidated groups and the treatment of temporary residents," Ms Wong said.

"A consultation window for this latest tranche of legislation of just over two weeks is extremely tight – a longer runway would produce better law and fewer problems down the track. 

“The sooner the changes are settled, and the sooner the ATO confirms how it works in practice, the better for buyers, developers and the housing supply the policy is meant to support."

On the new CGT apportionment methodology 

While CPA Australia supports the intent behind the proposed CGT apportionment methodology for affected assets as an alternative to formal valuations, Ms Wong warned it could still produce outcomes that don’t accurately reflect how an asset's value changed over time.

"Allowing a formula-based split instead of requiring a formal valuation of every affected property and unlisted asset at 30 June 2027 is a sensible way to hold down compliance costs for millions of taxpayers,” Ms Wong said.

“However, a formula is only fair if it reflects reality. The method assumes an asset grew at a steady, constant rate across its entire ownership period, meaning the pre- and post-2027 split is driven by an assumed curve rather than how the asset's value actually moved.

”Australians whose asset did most of its growing before 1 July 2027, then flattened, will be disadvantaged under the apportionment methodology. Their gain genuinely accrued in the CGT discount era - but the formula assumes it accrued evenly and pushes a slab of it into the new higher-taxed regime.

“A method meant to spare ordinary taxpayers the cost of a valuation can leave them paying more tax than someone who could afford professional advice and chose a valuation instead.”

CPA Australia is urging the ATO to release calculators, guidance material and record-keeping requirements well before commencement.

“We support giving people an alternative to a costly formal valuation. But for that choice to be real, taxpayers need to know what valuation evidence the ATO will accept and that’s the missing piece of the puzzle. It should also be clarified whether simpler, lower-cost approaches will be recognised, or only a full formal valuation,” Ms Wong said.

"The profession needs practical tools and certainty now, not shortly before implementation.”

New housing provisions must provide certainty

CPA Australia has welcomed changes extending the period a dwelling can be treated as "new" from 12 to 24 months, describing the measure as a practical improvement that better reflects how developments are built and sold.

However, CPA Australia is concerned the accompanying anti-avoidance provision may inadvertently capture legitimate commercial activity.

"The definition appropriately focuses on dwellings that genuinely add to housing supply. But the anti-avoidance rule is broad and self-executing. It applies where obtaining a tax benefit is merely one purpose, not necessarily the dominant purpose, and automatically removes access to the concession,” Ms Wong said.

"Genuine, commercially driven developments shouldn’t be caught in the same net as contrived arrangements, and taxpayers need confidence that it won’t be. 

"We’ll be examining closely how the self-executing rule operates in real-world transactions because certainty for developers and purchasers is ultimately what drives investment decisions and new housing supply.

“For example, if an owner separately titles a granny flat that would otherwise not qualify, the question is if this will be treated as a legitimate transaction or caught by the integrity rule. Clarity on these scenarios will be essential.”

CPA Australia is also concerned about the cumulative impact of the budget tax changes to capital gains tax, negative gearing and discretionary trusts, together with other substantial reforms happening at once – including Payday Super, anti-money laundering and counter-terrorism financing obligations, and a range of other tax changes.

"Accountants, tax advisers, lawyers and valuers are already operating under significant pressure. This reform is also a practical test of the Government's own productivity and red-tape reduction agenda.

"Without practical alternatives, we risk creating a bottleneck where many small businesses cannot access timely advice, face escalating costs or simply decide to pay the tax or close their business because restructuring is not commercially viable,” Ms Wong said. 

Media contact

Adrienne Biscontin
External Affairs
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0429 009 691