Small-to-medium enterprises (SMEs) in 2011-12 accounted for 14% of total ATO collections.11
Figure 7.11 Total tax collections (SME)
Registering in the system
There are currently around 183,000 SMEs. Of these, approximately 154,000 are registered for GST. Some SMEs are also registered for fuel tax credits, luxury car tax or wine equalisation tax, and may also be licensed for excise purposes. Relatively few businesses enter the taxation system as SMEs. Much of the annual growth in this population is attributable to micro businesses increasing their turnover above the $2 million threshold.
Lodging on time
There was a slight decline in on-time lodgment of income tax returns from SMEs, which can perhaps be attributed to a number of factors, including the lingering effects of the global financial crisis. However, the recent focus on income tax lodgment compliance in the $100 million to $250 million segment has seen us halt the decline.
There was an increase in non-lodgment of income tax returns by SME trusts which we are investigating further.
On-time lodgment of activity statements has slightly declined for SME clients and will continue to be monitored.
We contacted, via letter, phone or SMS, 90,000 businesses, following up their income tax activity statement lodgment obligations. These activities raised approximately $1.3 billion in net liabilities.12
Figure 7.12 Lodgment on time (SME)
Reporting correctly
In 2011-12, revenue attributable to 96% of SMEs was collected through our approaches to foster voluntary compliance, while almost $1.4 billion was collected as a result of compliance activities, including risk reviews and audits completed since 1 July 2011.
Table 7.3 Active compliance results (SME)
|
|
2008-09
|
2009-10
|
2010-11
|
2011-12 YTD
|
Liabilities raised ($m)
|
2,126
|
1,852
|
2,101
|
2,276
|
Estimated Cash Collected ($m)
|
1,504
|
1,280
|
1,166
|
1,384
|
Reviews, audits and compliance checks Completed
|
68,638
|
59,727
|
60,137
|
42,780
|
We are seeing an increased appetite amongst SME businesses to enter into Advance Pricing Arrangements (APAs). Over the last two years, we have entered into 43 APAs with SMEs, half of which were initiated by the taxpayer. We now have 70 APAs in place with SMEs providing practical certainty in relation to income tax cross-border related-party transactions valued at over $100 million.
1,964 audits and reviews have been undertaken as part of a specifically funded four-year program to improve income tax compliance in the $100-$250 million segment. 655 audits and reviews were conducted in 2011-12 as part of this program. Since receipt of specific funding in July 2008 the ATO has either met or exceeded our government commitments.
We have also developed a methodology to measure longer-term improvements in income tax compliance. This involves looking at returns lodged in subsequent years by taxpayers whose affairs had been reviewed or audited in earlier years. We estimate that over the first two years of the four year program, our compliance activity has led to an improvement of at least $363 million in income tax voluntarily paid in later years.
Where SME businesses have been subject to a GST audit - with a resulting adjustment to their reported liabilities - they continue to report increased liabilities for at least the next two years. This trend is most pronounced in our 'integrity of business system' and 'real property' risk areas.
Coinciding with an expanded income tax compliance program, the number of voluntary disclosures by SME businesses has increased. Over the last three years, over 370 SMEs reviewed their affairs after being contacted by the ATO and disclosed additional income tax liabilities totalling over $110 million, of which 92 were disclosed in 2011-12.
Both net tax payable and company profit and loss, as reported in income tax returns, have been generally tracking in line with the Corporate Profits Estimate. There is a significant divergence for 2008-09 for company profit and loss, primarily caused by growth in current year losses which were significantly higher than in previous years. We continue to monitor the application of the losses from 2008-09 against current year profits.
Figure 7.13 Trend in company profits and income tax payable (SME)
Paying on time
On-time payment of instalment activity statement and business activity statement liabilities for SMEs has remained steady in recent years.
However, fewer taxpayers are paying their income tax return liabilities on time and the amount paid on time has also declined. While 58% of tax return liabilities are paid on time, on average, 88% of tax return liabilities raised are paid by 30 June in the financial year in which they are due.
Figure 7.14 Payment on time (SME)
SME collectable debt was $3.1 billion, up $137 million from the previous year. SMEs accounted for 18.6% of total ATO collectable debt. The majority of collectable debt relates to SMEs with lower turnovers.
We continued to support viable SMEs that faced short-term financial difficulties and were willing to work with us to address their tax and superannuation debts.
We took timely firmer or legal action such as issuing garnishee notices and director penalty notices to collect debts in relation to businesses that were unwilling to work with us, continually defaulted on agreed arrangements, or did not have the capacity to pay and did not take steps to resolve their situation. In 2011-12 the ATO took over 6,000 firmer and legal recovery actions in relation to SMEs.
Figure 7.15 Collectable debt summary (SME)
Superannuation
We completed around 100 audits on small-to-medium Australian Prudential Regulation Authority (APRA) funds to verify the accuracy and completeness of their superannuation reporting.
The majority of APRA funds comply with their reporting obligations and willingly take corrective action where inaccurate reporting is identified. Overall we have seen a trend of improved reporting as demonstrated by increased TFN quotation and falling numbers of amendments to member information.
The percentage of active accounts with a TFN quoted in SME APRA funds has risen from 89.1% in 2007-08 to 95% in 2010-11.
Sections within Appendix
Last Modified: Thursday, 19 July 2012