The ATO’s Relationship with Small Business

The ATO’s Second Commissioner Jeremy Hirschhorn recently said that the ATO understands that small businesses are a critical component of the Australian economy. “They provide localised and tailored services, employment for their local communities; in short, they are a pillar of their local economies. But they are also a key element of the social fabric of a local community. They not only provide a service, but they give the community its character and its vitality. They are also contributors to their communities in a broader sense through the tax system: from employment taxes, to GST, to their own income tax.”

Some of the statistics mentioned in the address included:

• As of 30 June 2022, there were 4.5 million active small businesses. Around 730,000 small business employers employ almost 7 million employees.
• Those 4.5 million active small businesses, together with a further 2.1 million individuals linked to small businesses, account for $68 billion in income tax (around 17% of the income tax collected by the ATO). They also contribute over $19 billion in GST (about 28% of total GST).
• In 2019-2020, the ATO estimates that small business income tax performance was about 88%, leaving a “tax gap” of 12% or $12 billion. Second Commissioner Hirschhorn emphasised that these figures are not a criticism of small business.

Continue reading to learn about other topics raised in the Commissioner’s address with this blog post from Alexander Bright – trusted business accountants and bookkeepers in Melbourne.

Going Digital

A key focus area in this year’s ATO Corporate Plan is “to improve small business tax performance and participation by collaborating with partners to build a digital first tax ecosystem, enabling seamless tax and reporting from business source systems”.

The ATO strongly supports eInvoicing as a micro-economic reform assisting business, especially small business. More than 23,000 businesses are already taking advantage of eInvoicing, which makes business transactions easier and fairer, and less prone to scams (such as email take-over scams). Second Commissioner Hirschhorn also commented that the ATO does not see eInvoicing as the natural system for obtaining information about small business’ tax affairs.

Addressing Tax Debt & Payments

Second Commissioner Hirschhorn said that although the ATO has an obligation to collect what it is owed, the ATO is committed to engaging with taxpayers and is offering tailored support and assistance to those with overdue debts. All of the assistance provided by the ATO during the height of the pandemic remains, including deferrals and payment plans.

In supporting small businesses, the ATO also wants to help them to increase their overall business literacy and skills. For example, Second Commissioner Hirschhorn said that the ATO is doing lots of work to improve its digital self-help support for small business.

Other Topics

Other topics covered in the Commissioner’s address included:

• Minimising the impact of ATO errors
• Making it fairer for small businesses in a dispute with the ATO
• Protecting small business from unfair competition
• Cyber threats
• Operation Protego – This was established in response to brazen and opportunistic GST refund fraud

If you own or manage a small business and want to learn more about the ATO’s current relationship with small business, contact Alexander Bright today. We can also provide you with trusted small business accounting services and bookkeeping services in Melbourne.