Assistant Treasurer Michael Sukkar’s plan allows the ATO to attack small business

Assistant Treasurer Michael Sukkar. Picture: Gary Ramage
Assistant Treasurer Michael Sukkar. Picture: Gary Ramage

Assistant Treasurer Michael Sukkar has released the detail of his plan to change the way small and business is conducted in Australia.

I’ve previously warned readers that the “Sukkar plan” would be a severe blow to Australian entrepreneurship, but the detail shows that it goes much further than I had envisaged.

Prime Minister Scott Morrison and the Minister for employment and small business Michaelia Cash keep saying that the current government is about encouraging entrepreneurism, reducing red tape creating employment in small business and encouraging people to “have a go”.

It’s my feeling that Morrison and Cash genuinely believe that their government has those objectives and has plans to back up their statements with action. But they have been completely white-anted by Michael Sukkar. So, in fact, Scott Morrison leads a government whose actions are reverse of what he and Cash are saying.

Thanks to Michael Sukkar, the Morrison government actually plans to make running business much riskier and has added a mountain of new regulations. The first chapter of Sukkar’s regulations covers some 60 pages and around 20,000 words. But that’s just the start.

The Sukkar plan has passed through all the governmental checks and is incorporated into legislation before the parliament, along with the explanations. Sukkar’s aim is to create circumstances that give the Australian Taxation Office wide powers to undertake its own estimates of a company’s GST and make directors personally liable to pay that AT0 estimate. It’s a world first.

What makes the Sukkar plan so devastating for the biggest sector for employment in the community is that his legislation works by giving the ATO very wide, undefined powers.

Sukkar (via the ATO) has now revealed how those powers will be used against small and medium business. And because Sukkar’s legislation gives the ATO the power, the court system and the small business tax tribunal have been strategically bypassed.

Under the Sukkar rules the ATO has total power. It is investigator, prosecutor judge and executioner. The Sukkar plan in the 60-page set of regulations sets out a series of “don’ts”, or actions that are dangerous:

  • DON’T sell assets when there are signs of trouble. When businesses are under pressure, selling assets is currently a prudent action. Under “Sukkarism”, if your enterprise fails, those assets sales could trigger the ATO calculating your GST and making you personally liable.
  • DON’T appoint a director whose business has previously failed because it could trigger the AT0 powers if troubles arise. In a vibrant society a person who experiences non-fraud failure can be very valuable. Sukkarism smells of the debtor prisons of the Dickensian era.
  • DON’T backdate the appointment of a director. It should not happen, but entrepreneurial families have busy lives and accountants often backdate meetings It’s a harmless exercise that cuts red tape. Under the Sukkar plan, it is high-risk
  • DON’T transfer employees to a new company under the same effective control. This is a direct attack on our farming community, where such family practices are part of succession planning.
  • DON’T rely too much on senior management or outsiders, or they could become a concealed shadow or de facto director and be a trigger for ATO action.

Of course the so-called “practical guide” to the Sukkar plan is full if platitudes about how the Australian Taxation Office will be reasonable and fair in exercising these unrestrained powers. We know that is simply not in the culture of the ATO. The government has been publicly warned by the judiciary of the bad behaviour of the ATO. A senior federal court judge, Justice Logan, raised the possibility of charges being laid against the taxation commissioner for the bad behaviour of his department.

Richard Edmonds SC is now retired, but was a top NSW tax barrister who acted both for the ATO and for tax defendants before being appointed a Federal Court judge.

Earlier this year, he warned: “It is not (the ATO) leadership that is the problem, but the existence of a mentality, maintained by too many ATO officers for too long, that taxpayers on the whole are cheats and liars and anything the ATO does to bring them to account can be justified”.

The Sukkar plan tries to restrict use of the power to the top echelon, but that never works. The ATO’s practices have been blasted by the small business ombudsman Kate Carnell and the Inspector General of Taxation. Given these warnings, it is almost unbelievable that the Sukkar plan would be high on the government’s legislative program.

But the plan is cleverly concealed in legislation supposedly aimed at phoenix companies. The legislation has some excellent parts, giving ASIC greater powers that are subject to the courts, but the phoenix title is merely a smokescreen.

The ALP now realises that Michael Sukkar could be the Morrison government’s Chris Bowen — a well-meaning minister/shadow minister who surrounds himself with people who give him bad advice.

Bowen’s bad advice on franking credits cost Bill Shorten the election. It will take t about two years for Sukkarism to have its impact. Which will bring us up to around the time of the next federal election.