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  • Pillars of Compliance

    Registrations

    Around 2.75 million clients were registered for GST in 2017–18 – an increase of approximately 3% on last year’s GST-registered population of just over 2.66 million clients. This increase is consistent with the growth in business activity, driven by new initiatives such as GST on low value goods and digital services. These initiatives, along with a growth in the sharing economy, have required people who have never dealt with us before to register for GST.

    The sharing economy has also spiked an increase in ABN registrations for people undertaking jobs that are not required to be registered for GST, such as Airtasker and offering accommodation through Airbnb.

    We compare the number of entities that declare business income (in excess of $75,000) in their income tax returns with the number of compulsory registrants. This assesses whether we have the right number of registrants in the system. In 2017–18, 95.1% of compulsory registrants had registered for GST compared with 94.7% in 2016–17.

    GST registrations by client experience

    The small business population accounts for 78% and the privately owned and wealthy groups population accounts for 13.3%.

    Figure 6: Clients registered for GST by client experience

    This graph shows the number of clients registered for GST in 2017–18, by client experience. The numbers are: small business 2,195,438; privately owned and wealthy groups 372,570; not for profit 69,009; public business and multinational 45,988; and other 120,625.

    Increases in registrations occurred in the following industries for the last four years:

    • construction
    • professional, scientific and technical services
    • rental, hiring and real estate services.

    A growing number of individuals are operating as small businesses in the sharing economy, as a way of generating supplementary income – without fully understanding the tax consequences. The use of independent contractors is also on the rise, blurring the line between employees and contractors. There is subsequent uncertainty over registration requirements.

    This may have an impact on compliance, ranging from lodgment to payment. To address this risk and ensure small businesses register for the correct roles, we have streamlined business registration and access to information. We are also partnering with key industry operators (such as Uber) to develop Australian business number (ABN) and GST registration as part of normal business when new participants sign up.

    GST registration risks

    We are managing registration risks that fit into one of two categories:

    • Some businesses are deliberately not registering in order to operate outside the system.
    • Fraudulent registration of businesses is being used in an attempt to claim illegitimate GST refunds. This year we identified 1,220 incorrectly registered entities, preventing a potential loss of $7.3 million.

    Lodgment

    We measure lodgment performance for monthly, quarterly and annual business activity statements.

    Overall lodgment of 2017–18 activity statements was 153,000 (0.1%) greater than in 2016–17.

    Total on-time lodgments and the overall activity statement percentage had been slowly declining until recently. However, this trend has been arrested, in response to strategies we put in place.

    Our strategies to continue to arrest the decline include:

    • improved identification and treatment of ceased businesses, with tailored treatments specific to the active and ceased business populations
    • an early intervention SMS strategy, commencing in the second quarter of 2018–19
    • new approaches to non-lodgers in the black economy, with particular focus on integrity risk areas, including the property and construction industry
    • using taxable payment reporting system information, with a focus on payees who have multiple activity statements outstanding.

    Figure 7: Total BAS lodgment

    This graph shows the BAS lodgment figures for the past four financial years. 
2014–15: total BAS lodged 89.9%; lodged monthly 93.7%; and lodged quarterly 88.3%.
2015–16: total BAS lodged 89.8%; lodged monthly 94.0%; and lodged quarterly 88.0%.
2016–17: total BAS lodged 87.6%; lodged monthly 93.2%; and lodged quarterly 85.3%.
2017–18: total BAS lodged 87.7%; lodged monthly 93.4%; and lodged quarterly 85.4%.

    Monthly lodgments performance

    On-time lodgment performance for 2017–18 monthly activity statements was 83.7%; 0.2% above 2016–17.

    Quarterly lodgments performance

    On-time lodgment performance for 2017–18 quarterly activity statements was 73.9%; 0.4% above 2016–17. Over 146,000 more quarterly on-time lodgments were received in 2017–18.

    Figure 8: BAS lodgment on time

    This graph shows the BAS lodgment on time for the past four financial years. 
2014–15: total BAS lodged on time 78.0%; lodged monthly 82.9%; and lodged quarterly 76.0%.
2015–16: total BAS lodged on time 77.7%; lodged monthly 83.2%; and lodged quarterly 75.3%.
2016–17: total BAS lodged on time 76.4%; lodged monthly 83.5%; and lodged quarterly 73.5%.
2017–18: total BAS lodged on time 76.6%; lodged monthly 83.7%; and lodged quarterly 73.9%.

    Debt

    At 30 June 2018, GST total debt was $5.5 billion, down 0.8% compared to last year. GST collectable debt was $4.0 billion, up 4.2% from 2016–17.

    Since 2012–13, the growth in GST collectable debt (12.0%) has been significantly lower than growth in GST revenue (31.3%), indicating that the ATO’s approach to payment and debt is effective.

    Although small business continues to represent the largest proportion of GST collectable debt, it has remained relatively stable over recent years. In 2017–18, small businesses accounted for 68.4% of GST collectable debt, compared to 69.7% in 2012–13.

    Drivers of GST collectable debt

    Drivers of GST collectable debt include:

    • natural growth in a voluntary compliance system – as the economy grows and GST collections increase, unpaid GST also increases
    • the compounding effect of the general interest charge on unpaid GST – at the current interest rate, debt doubles in around nine years
    • the impact of closing the tax gap – audit-raised GST liabilities have increased by 38.7% over the past six years (2013–18)
    • the ATO being treated as the fifth bank – commercial lending has tightened.

    Figure 9: Total debt and collectable debt 2015–18

    Figure 9: Total debt and collectable debt This graph details the figures for the past four financial years of the total GST debt and the collectable GST debt. Total GST debt for 2014–15 $5.0b, 2015–16 $5.0b, 2016–17 $5.6b and 2017–18 $5.5b. Collectable GST debt 2014–15 $3.5b, 2015–16 $3.4b, 2016–17 $3.8b and 2017–18 $4.0b.

    Figure 10: Debt as per cent of revenue

    This graph shows debt as a per cent of revenue for the last six financial years. The percentages are: 2012–13 7.5%; 2013–14 7.0%; 2014–15 6.4%; 2015–16 5.9%; 2016–17 6.4%; and 2017–18 6.3%.

    Figure 11: Ageing of GST debt by number of cases

    This graph shows ageing of GST debt by number of cases for the last four financial years.
2014–15: from 0–29 days 41,979; 30–59 days 72,535; 60–89 days 10,443; 90–365 days 92,584; and >366 days 86,873.
2015–16: from 0–29 days 45,808; 30–59 days 75,147; 60–89 days 10,140; 90–365 days 95,177; and >366 days 81,192.
2016–17: from 0–29 days 30,821; 30–59 days 72,899; 60–89 days 9,604; 90–365 days 93,557; and >366 days 68,195.
2017–18: from 0–29 days 33,296; 30–59 days 86,451; 60–89 days 9,901; 90–365 days 112,450; and >366 days 69,329.

    Figure 12: Ageing of GST debt by value

    This graph shows ageing of GST debt by value in millions of dollars for the last four financial years.
2014–15: from 0–29 days 462; 30–59 days 446; 60–89 days 106; 90–365 days 1,104; and >366 days 1,355.
2015–16: from 0–29 days 428; 30–59 days 462; 60–89 days 121; 90–365 days 1,103; and >366 days 1,268.
2016–17: from 0–29 days 409; 30–59 days 553; 60–89 days 163; 90–365 days 1,252, and >366 days 1,461.
2017–18: from 0–29 days 441; 30–59 days 559; 60–89 days 109; 90–365 days 1,406; and >366 days 1,485.

    Support for business

    We offer a range of contemporary tools and services to make it as easy as possible for businesses to pay their tax on time.

    ‘Payment thinking’ is about designing processes, systems and approaches that make payment an easy and natural part of activities across all stages of tax and super. Its many aspects include:

    • bringing the payment conversation closer to the liability being raised
    • making it simple to pay and hard not to, by improving our digital services and embedding them in natural systems
    • leveraging our data to tailor the client experience and take action to prevent debts occurring
    • influencing the design of the tax and super system to work towards ‘tax (payment) just happens’.

    We also provide support for small business in the form of online newsrooms, emails for small and new businesses, workshops and webinars. The ATO app enables business operators to view upcoming due dates, and check the financial health of their business.

    We recognise that businesses may occasionally experience short-term cash flow issues that prevent them paying on time, so we offer a range of measures to help them address any debts that arise as early as possible. While debts are still manageable we send SMS reminders, offer payment plans online, accept direct debit payment plans, and intervene earlier with tailored discussions about the debt.

    Where businesses don’t engage with us to address their debts, we take timely, stronger action. This year we issued an increased number of garnishee notices and director penalty notices.

      Last modified: 18 Mar 2019QC 58283