Micro enterprises in 2011-12 accounted for 10% of total ATO collections.9
Figure 7.6 Total tax collections (Micro)
Registering in the system
Around 2.8 million micro enterprises have an active ABN, representing a significant percentage of the total entities on the ABR.
A wide range of entities (including governments and charities) can hold an ABN, but given ABS data on the number of businesses in Australia, 2.7 million seems high.
We are finding that the ABN is being used in ways that were not intended when it was introduced.
Some employers, to avoid obligations, are requiring employees to have an ABN. They incorrectly portray the underlying employment relationship as a contractual relationship. Compliance activity aimed at employers participating in this improper treatment has continued with approximately 1,100 reviews and audits being conducted in 2011-12.
However, we continue to receive a large number of ABN applications from individuals and have intensified our scrutiny of those applications. This is so we can ensure those individuals are carrying on an enterprise. As a result, the proportion of total ABN applications being refused for individuals has increased from 5.26% in 2010-11 to 6.44% in 2011-12.
To help businesses decide whether the service providers they engage are employees or contractors we developed an online decision support tool. Since July 2009 the average monthly usage of the tool has more than doubled to around 8,000 hits.
Lodging on time
We are seeing some decline in the numbers of income tax returns and activity statements lodged on time within this sector. This may be reflective of the economic climate and lingering effects of the global financial crisis, and businesses may not lodge to avoid potential tax debts.
We contacted via letter, phone, or SMS, 1.9 million micro enterprises following up their income tax or activity statement lodgment obligations. These activities raised approximately $2.2 billion in net liabilities.10
Figure 7.7 Lodgment on time (Micro)
Reporting correctly
In 2011-12, revenue attributable to 91% of micro enterprises was collected through our approaches to foster voluntary compliance, while around $2.65 billion was collected as a result of compliance activities, including risk reviews and audits completed since 1 July 2011.
Table 7.2 Active compliance results (Micro enterprises)
|
|
2008-09
|
2009-10
|
2010-11
|
2011-12 YTD
|
Liabilities raised ($m)
|
2,655
|
2,959
|
4,442
|
4,374
|
Estimated Cash collected ($m)
|
1,624
|
1,410
|
2,079
|
2,654
|
Reviews, audits and compliance checks completed
|
252,120
|
211,914
|
228,972,
|
244,022
|
Our audit program last year covered income tax, including employer PAYG withholding (PAYGW) obligations, and GST. One focus area is employers who withhold under PAYGW but neither report nor pay the withheld amount to the ATO. After an audit we monitor an employer's compliance behaviour to see whether there is any improvement. From the 4,195 tax records of employers who were audited in 2010-11, there was an improvement of $231.5 million in PAYGW voluntarily paid in 2011-12.
The PAYG withholding system and data matching programs make it harder for individuals to under-report their income tax liability, but there is not the same level of control over micro businesses.
Through our compliance activities we are finding areas of non-compliance that warrant further attention. For example, an annual reporting system has been introduced in the building and construction industry which will enable us to identify and address potential non-compliance in those industries.
Paying on time
On-time payment of instalment activity statement and business activity statement liabilities by micro enterprises has remained reasonably 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 60% of tax return liabilities are paid on time, on average, 83% of tax return liabilities raised are paid by 30 June in the financial year in which they are due.
Figure 7.8 Payment on time (Micro enterprises)
Micro enterprise collectable debt was $10.1 billion, up $891 million from the previous year. Micro enterprises accounted for 61.4% of total ATO collectable debt. We believe the increase reflects the cash-flow impacts of a challenging economic environment.
We continued to support viable micro enterprises that faced short-term financial difficulties and were willing to work with us to address their tax and superannuation debts.
Figure 7.9 Collectable debt (Micro enterprises)
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 28,000 firmer and legal recovery actions in relation to micro enterprises.
Superannuation
In 2011-12 over half of superannuation guarantee liabilities were in the micro market.
Figure 7.10 Superannuation guarantee charge raised, collected and transferred
Independent approved auditors have consistently reported two percent of SMSFs breaching their regulatory obligations over the past 5 years. Most of these breaches have been rectified, indicating a high level of compliance with regulatory obligations.
However, we reviewed the compliance of over 11,800 SMSFs (mainly micro enterprises) raising $21.9 million and making 74 'non-complying' due to serious breaches of their obligations.
Sections within Appendix
Last Modified: Thursday, 19 July 2012