Family business and tax holds key to Dutton’s success

The new opposition leader Peter Dutton needs to widen his scope to focus on family businesses if he wants to be taken seriously. Picture: Tracey Nearmy / NCA NewsWire

New opposition leader Peter Dutton has declared he wants to look after small business, but he should widen it to family business.

It won’t be easy for the Coalition. Three years ago it announced the same policy and failed. It did speed up payments and looked after family enterprises with JobKeeper, but then came two sickening failures so that in the election it could not claim to be the family business party.

First, despite being supported by the Labor Party and all state Premiers, the Coalition succumbed to the large corporate lobby on unfair contracts which allowed a joyful ALP to make the end of unfair contracts their signature small business policy.

Secondly, the Coalition turned a blind eye to the recommendations of a joint party parliamentary inquiry into the family business tax collection methods used by the Australian Taxation Office.

It advocated a US-style Bill of Rights with detailed powers for the Inspector General of Taxation or similar body to supervise implementation. The Coalition government was bluffed by the ATO and did nothing.

Unless Dutton is prepared not only to tackle the ATO’s abuse of family business but convince the electorate that, if he gets to office this time a Coalition will act, then he won’t be taken seriously in the family business sector.

However, he does have one advantage: Dutton helped develop a family construction business before going into politics.

The ATO is hoping the new ALP government will give it even greater scope to attack family business. Just before the election it revealed a draft proposal to retrospectively machine gun family trusts and put many trust tax accountants out of business.

John Dahlsen is one of the few family business owners with the courage to tell the truth about the ATO.

I often quote John Dahlsen on these matters because he is one of the few family business owners with the courage to tell the truth about the ATO. To help Dutton (and the Albanese government if it is interested) let me quote seven issues from Dahlsen’s latest paper which Dutton will need to tackle if he is to be taken seriously.
Mobile users: read the white paper here.

Issue one: “Why does not the tax advisory industry complain? Tax is an extremely complex area and the professional firms earn huge fees at huge margins on the tax advice. In effect they gain from the system and have become very comfortable with it, make a lot of money and build successful careers out of it.”

Issue two: “With the ATO you are guilty until you prove your innocence. And the ATO can go to extraordinary steps requiring you at great cost to prove your innocence. Even when you prove you are innocent, there is no compensation for the considerable personal and professional cost you have incurred to establish your innocence as a good citizen in paying your taxes.”

Issue three: “The ATO staff can come to your home or business without notice and demand to see documents and access and remove your computers. Generally, for a policeman to do this, the police must obtain a warrant from a judicial or semi judicial officer.”

The ATO has too much influence over Treasury.

Issue four: “The ATO has too much influence over the decisions and attitudes of Treasury. One can understand that the Treasury is responsible for collecting Australia’s revenue and the government is very dependent on that vast revenue stream so (they) don’t upset that source of income that drives government activities and decision making.

“Many politicians receive complaints from their constituents about tax treatment but there is no aggregated analysis of that information. The politicians have little success in resolving the problems.”

Issue five: “In the US, the (Internal Revenue Service) offers huge rewards for information that leads to more tax being paid. This program has been massively successful in the US and as a consequence, the IRS has been able to back off many of the intrusive activities that take place in Australia.

Issue six: “Does not the ATO have some obligation to be more productive in terms of the interest of the efficiency of the ATO and the tax payer? Is not driving productivity and efficiency one of the most important aspects for government agencies and businesses to improve our standard of living?

“In the Top 500 Trusted Tax Payers program, the ATO offer the bait that if you provide the ATO with all the information the ATO require -validating that information and interviewing of staff over a long period at great tax payer cost – the ATO will be less intrusive in your affairs for a three-year period.”

“(But) the ATO will still apply the same due diligence process. With the time involved, it is like peeling an onion with the ATO gradually demanding more and more information to get to the core of your business. There is no sense of urgency or time involved in getting to the core.”

Issue seven: “There are thousands pages of tax laws and online information bulletins explaining the law. Each specialised area within the ATO alone have masses of material.

“There is a huge opportunity to codify and simplify the tax law making it easier for the ATO to administer and much easier for tax payers to comply. The massive complexity has added huge cost within the ATO and to the tax payer through the necessity to spend huge sums on tax advisory fees and of course the internal time spent by tax payers.”

Dutton did well in defence but in many ways fairness for family business is harder. We will discover whether Dutton is up to it.