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  • Indicators of participation

    Ensuring correct reporting

    In 2016–17 we undertook compliance activities that raised $2.9 billion from over 1 million client contact cases. This year there was a focus on the precious metals industry as well as property and construction.

    The GST gap is the difference between the amount of GST payable under the law and the amount actually collected by us. The GST gap in 2015–16 has trended slightly upwards from previous years to be $4.5 billion (7.3%). The increase in the GST gap estimate is driven by increases in dwelling investment, exacerbated by upfront GST input credits and lagging GST receipts on sales (see Managing revenue for more detail on our compliance activities).

    Correctly registering in the system

    The population of active GST accounts continues to follow a similar trend to last year, with a small overall increase and fewer cancellations.

    The number of requests for deferred GST registrations was down significantly from last year. However, it should be noted that approvals spiked last year following the application to register for deferred GST being made available through ato.gov.au and a portal broadcast that promoted awareness of the scheme.

    BAS-related payments and activity statement refunds remain in line with previous years, with small increases in numbers and value. There was a small increase in the number of businesses reporting annually but – following simplified online functionality – significantly more clients using the streamlined option.

    The number of activity statements issued was down on last year. However, last year’s figure was inflated due to a system issue, which required additional generation of activity statements in December 2016. As that had resulted in a 9% annual increase, this drop represents a return to normal expectations with a small increase over the previous year.

    Processing performance remains well in excess of benchmarks. Highlights for 2016–17:

    • more than 369,400 new GST accounts were registered
    • there were 2.7 million active GST accounts at 30 June 2017
    • 319,560 GST registrations were cancelled during the year
    • the total population of active GST registrations increased by 1.8% on last year
    • while 11,486 taxpayers registered to defer GST at 30 June 2017, only 8,947 actually deferred in 2016–17
    • a total of $25.4 billion in GST was deferred
    • 1,270 new deferred GST registrations were approved
    • 1,109 deferred GST registrations were cancelled at the taxpayer’s request
    • 14.1 million BAS-related payments were received, with a value of $260.1 billion (including non-GST amounts from BAS), up 5.7% in number and 3.2% in value
    • 99.8% of payments were banked by the ATO within two banking days
    • 1.7 million activity statement refunds were issued, with a value of $51.7 billion – down 0.1% in number and up 4.0% in value compared with last year
    • $6.4 million in interest was paid on delayed refunds, up 67.6% on last year
    • 11.4 million BAS were issued, down 7.6% on last year
    • 10.3 million BAS were processed, up 0.3% on last year
    • the simplified BAS options were used by 94.2% of GST registrants at 30 June 2017, with 90.1% using the 'streamlined' option and 4.1% using the 'instalment' option
    • over 213,700 businesses chose to report annually, an increase of 0.6% on last year
    • at 30 June 2017, 77.5% of all BAS lodgments were received electronically, that is
      • 76.8% of monthly lodgments
      • 77.8% of quarterly lodgments
      • 74.9% of annual lodgments
       
    • of all activity statements lodged electronically, 99.7% were processed within 12 business days.

    Lodging tax information on time

    We are tailoring our strategies to better engage with the client base. This year:

    • 93.2% of monthly BAS were lodged, with 83.5% lodged on time
    • 85.3% of quarterly BAS were lodged, with 73.5% lodged on time
    • $1.2 billion in GST liabilities was raised from lodgment compliance activities, around $0.28 billion lower than last year.

    In order to improve the client experience and reduce reverse-workflow, we continue to focus on improving productivity and efficiency. Over the 12 months, we:

    • used analytics for early identification, and exclusion from treatment, of non-lodgers who were expected to lodge without ATO intervention (‘self-finalisers’)
    • incorporated behavioural insights to populate communication products, with a resulting increase in effectiveness
    • identified and excluded non-operating small business from lodgment compliance activity.

    On-time lodgment of monthly BAS has steadily increased over the past few years. However, a slight decline in lodgment of monthly BAS occurred this year. There has also been a decline in on-time and overall lodgment for quarterly BAS.

    It is acknowledged that natural disasters and system issues over the last six months of 2016–17 may have contributed to the decline in end-of-year performance from 2015–16 to 2016–17. Notwithstanding this, the decline in overall lodgment of activity statements, suggests a change in client behaviour – choosing not to lodge rather than lodging late.

    We have identified that the reduction in quarterly lodgment performance is attributable to individual clients in the micro market segment (turnover less than $10 million). We are working to better understand this population and to address the decline.

    During 2016–17, we increased our focus on GST compliance, in part to address the decline in on-time lodgment. We continually analyse lodgment data, taxpayer behaviour and business registration information to determine what changes may be required to our strategies to address late and outstanding lodgment obligations. This enables us to adjust our lodgment compliance strategies to arrest the decline. We have:

    • reduced the volume of unnecessary contacts with those who are likely to complete their lodgment without our intervention, and continued to contact those who need support to lodge
    • focused on engaging earlier with unrepresented taxpayers, where this approach has demonstrated greater outcomes. Where the taxpayer is represented by a tax professional, results showed that early engagement was not effective.

    To support tax professionals we have:

    • added new functions to the Tax Agent Portal
    • provided tax professionals with the monthly ‘registered agent alert letter’ (electronically), which lists all of their clients’ overdue documents and debts
    • enhanced the client communication list, which allows agents to see all ATO correspondence sent to their clients, including documents delivered to the taxpayers myGov account
    • stopped sending pre-due date reminders to clients who have engaged a tax professional.

    These improvements allow agents to have greater visibility of their clients’ tax obligations. The agent is then able to engage with their client to support timely lodgment and payment of tax obligations.

    We are continuing to modify our strategies to better engage tax professionals and unrepresented taxpayers.

    Paying tax obligations on time

    We aim to deliver an improved payment experience focused on willing participation. In 2016–17:

    • the value of GST liabilities paid on time decreased to 88.2% (compared with 89.5% last year)
    • GST liabilities paid within 90 days decreased to 95.4% (compared with 96.0% last year).

    At 30 June 2017, total GST debt was $5.6 billion and GST collectable debt was $3.8 billion, a year-on-year increase of 13.5%. There were over 275,000 GST collectable debt cases at 30 June 2017, a year-on-year decrease of 10.5%.

    The ratio of GST collectable debt to GST revenue was 6.4%, up from 5.9% in 2015–16. A range of factors contributed to this increase in collectable debt.

    Our long-term approach to delivering an improved payment experience and focusing on willing participation includes a range of strategies already well under way.

    As shown in Figure 2, small businesses account for 68.4% of collectable debt.

    Figure 2: GST collectable debt by client groups, at 30 June 2017

    This graph shows four client groups. Small business accounts for 68.4%, Privately owned and wealthy groups 25.5%, Other 3.5% and Public and multinational businesses 2.6%.

    In terms of industry groups (Figure 3), the proportions have remained relatively steady since 2015–16.

    Figure 3: GST collectable debt by industry, at 30 June 2017

    This graph shows the five industries with the highest GST collectable debt, in 2015–16 and 2016–17. In 2016–17, the construction industry accounted for 27.5% of collectable debt, professional, scientific and technical services accounted for 11.9%, accommodation and food services accounted for 7.6%, administrative and support services accounted for 5.4% and manufacturing was 6.2%.

    In 2016–17, we continued to expand our services to make it easier for clients to self-manage their obligations, including GST. For example, we improved our automated phone service for payment plans by:

    • increasing the maximum amount for automated payment plans, up to $100,000
    • incorporating risk-profiling to identify and transfer clients in certain profiles irrespective of the debt amount, to a service representative to negotiate a suitable payment plan tailored to their individual circumstances.

    These updates enable more clients to set up payment plans through self-help channels, while helping taxpayers who may require a more tailored approach when negotiating repayment.

    We make it as easy as possible for clients to pay their tax on time, by providing a wide range of tools, payment channels and self-serve payment options. For example:

    • clients can use the ATO app to identify their due dates which can then be loaded into their phone calendar so that they receive a reminder prior to each due date
    • clients can manage their cash flow by pre-paying part or all of their activity statement liabilities
    • we issue SMS payment reminders before the due date to clients that are unlikely to pay on time or at all.

    We recognise that clients may occasionally experience short-term cash flow issues that prevent them paying on time. To assist we offer a range of tools and services to help make it easier for them to get back on track, including:

    • SMS payment reminders after the due date
    • automated phone service for payment plans for debts up to $100,000
    • online payment plan service for debts up to $100,000 for sole traders
    • a business performance check tool, as part of the ATO app, for business operators to quickly check the financial health of their business
    • an online business viability assessment tool which helps business operators determine whether their business is viable.

    We also recognise that clients can experience longer term financial difficulties due to challenging economic conditions or unexpected events. We take an empathetic approach to working with these clients to get them back on track and offer a range of options, including:

    • remitting any penalties or interest charged during the time they have been affected
    • offering payment plans tailored to their individual circumstances, including interest-free periods.

    Our preference is to help clients meet their payment obligations on time or address any debts that arise as early as possible, while they are manageable.

    For the minority of clients that don’t pay on time or engage with us to address their tax debt, we take timely stronger action to prevent them gaining an unfair financial advantage over the majority that pay, ensuring a level playing field for all. Stronger action can include:

    • garnishees
    • director penalties
    • insolvency proceedings.

    Providing law clarity and advice

    The ATO offers a range of products to help our clients understand how the law applies to them. This includes public and private advice and guidance. In improving public and private advice and guidance, the ATO is focused on providing clearly expressed rulings, practical guidance and general assistance to support and assist taxpayers with their tax affairs.

    A significant focus for us has been making it easier for clients to find information and we have continued to exceed our service commitments in providing ‘timely service’, as well as keeping taxpayers informed of the progress of their private rulings.

    GST technical advice (guidance) and private rulings finalisations have exceeded the timeliness benchmarks. Guidance figures remain aligned to last year; however, there has been a small decrease in timeliness performance for private rulings when compared to last year. Our assessment on this decrease is that the private ruling applications have become more technically complex in nature.

    We have worked to provide clients with an ATO view on the application of the GST law on issues, such as:

    • ride-sourcing – communicating to the industry the impact of the favourable Federal Court decision through various channels
    • cross-border transactions – engaging with the community to explain the application of GST to imports of low value goods and inbound digital services and products, highlighting the impact on the process and procedures that affect cross-border business-to-business and business-to-consumer transactions
    • the Tourist Refund Scheme – developing a new currency conversion legislative instrument and significant input into a submission to Treasury outlining reforms to the tourist refund and sealed bag schemes.

    We have developed revised guidance to provide certainty to the community on the application of these new measures. Key issues and focus areas in 2016–17 were:

    • entitlement to refunds
    • going concerns
    • food classification
    • government infrastructure projects
    • safe harbours
    • financial supplies
    • changes to the ‘four-year rule’ to access refunds of overpaid GST.

    During 2016–17, we concluded our ‘Modernising Advice’ initiative. This initiative built on our contributions to corporate advice reviews. We also contributed to the development and implementation of initiatives from the ATO Review of Private Advice – for example, the broadening of early engagement to all clients, the release of a streamlined draft ruling process (where advisers can submit a ruling they have drafted themselves) and updating our short form private ruling letters. Each of these is aimed at improving the client experience through timely and tailored advice.

    Our commitment to improving the client experience is demonstrated by being at the forefront of adopting new public advice products – for example:

    • a law companion guideline on low value imported goods
    • a practical compliance guideline on GST and countertrade transactions.

    Recently, we launched a renewed financial supplies and insurance strategy aimed at improving the client experience, providing transparency, assurance and greater certainty. We will do this by using a range of assurance approaches tailored to the issue and the client, including ‘justified trust’, reviews, audits, public advice and guidance, early engagement, workshops and consultation.

    We have worked closely with the business community this year on a range of issues, including:

    • food classifications
    • ride-sourcing and the sharing economy
    • financial services and insurance industry GST issues
    • developing ‘safe harbours’ to ease administrative costs for our clients and the ATO
    • changes to the four-year rule and BAS amendments (the time period allowed to access refunds for overpaid GST or amend BAS for errors).

    In 2017–18, we will continue to focus on further incremental improvements to the timeliness and quality of our advice.

    We finalised 748 GST-related private ruling requests this year, achieving 91% finalised within 28 calendar days of receiving all the necessary information. The number of private ruling requests has remained consistent with 748 completed this year compared to 730 in 2015–16.

    We completed 4,669 guidance cases, which is a 13% reduction on the 5,345 guidance work items completed last year. In 2015–16, we experienced a spike in guidance requests due to changes in GST law related to time limits of claiming refunds, notifications for claiming refunds and the backdating of registration. This year, 93% of the requests were finalised within 28 calendar days.

    New measures

    Table 7: New policy and law

    Issue

    Announced/
    effective

    Purpose / features

    GST on property transactions

    2017–18 Federal Budget, effective 1 July 2018

    • To manage the issue of developers failing to remit the GST while having claimed GST credits on their construction costs.
    • Buyers required to remit GST directly as part of property settlement.
    • $660 million over the forward estimates period.
     

    Precious metals industry – combating fraud

    Effective from 1 April 2017

    • Preventing entities from exploiting loopholes in the GST law.
    • Entities buying gold, silver and platinum products must now pay the GST directly to the ATO instead of paying it to the seller.
    • Reverse-charge prevents sellers from ‘phoenixing’ without remitting the GST owed.
     

    Digital currency – removing GST double taxation

    2017–18 Federal Budget

    • Consistent with supplies of money, supplies of digital currency to receive equivalent GST treatment, particularly for foreign currency.
    • Supplies and acquisitions of digital currency to be disregarded for the purposes of GST.
    • Digital currency will only be recognised for GST purposes if the supply is made in exchange for money or digital currency.
    • Purchases using digital currency will be treated in the same way as purchases made with money.
     

    Imported services and digital products – extending GST

    Royal Assent, effective from 1 July 2017

    Ensuring supplies of imported services and digital products have the same tax treatment as similar supplies sourced from within Australia.

    Online gambling market is currently untaxed unregulated/offshore

    Effective from 1 July 2017

    To ensure that online gambling providers with Australian turnover over $75,000 are subject to GST on supplies of digital products and services, regardless of their base of operations.

    Low value imported goods – legislation

    Royal Assent, to start on 1 July 2018

    To ensure that low value imported goods sold to consumers in Australia have the same tax treatment as goods sourced from within Australia

    The Productivity Commission to undertake an inquiry and report back by 31 October 2017 on:

    • the effectiveness of the amendments
    • whether other models for collecting GST might be suitable
    • any other aspect the Commission considers relevant.
     

    Stakeholder relationships

    GST Stewardship Group

    The GST Stewardship Group membership encompasses business, academic, state and territory representation and broader community perspectives. This provides views on the operation and sustainability of GST, and insights into the quality and effectiveness of the GST system as it may influence our administration and future policy-related considerations. The group is co-chaired by Tim Dyce the Deputy Commissioner, Indirect Tax and Kevin O’Rourke, Chartered Accountants Australia and New Zealand.

    All members possess a current understanding of the GST system in operation and this facilitates fruitful discussions in the national interest. They have a commitment to improving the administration and operation of the GST system into the future. The GST Stewardship Group provides a mechanism to identify emerging products for the ATO to consider and provide guidance about potential GST ramifications as well as support to the broader community.

    There are four face-to-face meetings scheduled each year, as well as a number of phone conversations and rapid solution design workshops where required. Contact details, membership, statement of intent and meeting minutes are available on ato.gov.au.

    Consultation

    Our consultation arrangements with stakeholder and industry groups provide flexible and responsive mechanisms for consulting to improve outcomes more broadly.

    During 2016–17, we received 11 GST consultation requests where we consulted with industry representatives, government bodies and various professional associations. These were:

    • a fairer approach to penalties
    • correcting GST errors amendment determination
    • proposed amendments to GSTR 2006/9
    • foreign currency conversion legislative instrument
    • income tax and GST on financial assistance payments and levies in the point-to-point transport industry
    • remaking legislative instruments on  
      • accounting on a cash basis determination – section 29-40(1)(c)
      • waiver of tax invoice requirement determinations – section 29-10(3)
      • waiver of adjustment note determinations – section 29-20(3)
      • particular attribution rules determinations – section 29-25(1)
      • recipient created tax invoice determinations – section 29-70(3)
       
    • GST and non-commercial rules – benchmark market values
    • GST and customer-owned banking institutions
    • meaning of collectables and antiques
    • making legislative instrument Goods and Services Tax: Valuable Metals Market Value Determination 2017
    • remaking legislative instrument – Simplified Accounting Methods Determination (No. X) 2017 for Food Retailers – Business Norms, Stock Purchases and Snapshot Methods.

    We also met with the Big 4 Accounting firms and discussed a range of topics throughout the year, including:

    • cross-borders new measures
    • financial services and insurance GST strategy
    • digital opportunities for tax administration
    • GST on property transactions
    • private advice.
      Last modified: 30 Jan 2018QC 54336