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  • Small business: the big picture

    Find out how we work with and for small business:

    Help for small business

    We are committed to making it as easy as possible for all small businesses to understand and meet their tax obligations.

    We have an extensive and dedicated focus on:

    • delivering new tools to make things easier
    • providing customised support for small business when they need it.

    We have worked to:

    • improve the experience of small businesses in dealing with us
    • transform our culture to focus on client service and early intervention.

    Using technology to enhance interactions

    Sole traders can access ATO online services through their myGov account or voice authentication on any device to:

    • manage activity statements and PAYG instalments
    • manage accounts
    • make payment arrangements and more.

    Sole traders can also use myGov to lodge their tax return. Businesses with an AUSkey or a linked myGov account that use Manage ABN Connections, can access the Business Portal to:

    • prepare and lodge activity statements and annual reports
    • manage accounts
    • update registration details.

    The ATO app

    Small business owners with simple tax affairs can use the ATO app to:

    • manage tax obligations
    • set reminders for key dates
    • keep track of business income and expenses using the myDeductions tool
    • compare performance against similar businesses with the Business Performance Check.

    The app – already downloaded over 1.6 million times – includes a range of easy-to-use, online tools, such as the tax withheld calculator and ABN Lookup.

    Support when and how you need it

    We offer free and tailored support services to keep small businesses on track, or help them get back on track. Our staff are trained in mental health support, recognising the pressure small business owners are under.

    As well as the information, services and tools we provide to assist running a small business, we focus on early engagement and support for those who need extra assistance to understand, increase their confidence and build essential acumen to be successful and viable.

    We take an evidence based approach and work with small businesses and their intermediaries. We deliver face-to-face workshopsExternal Link and webinars to small business. We show small businesses how to engage with the ATO digitally, and use our digital offer to help build their cash flow, business management, tax and super, and digital acumen. Workshop topics include Tax essentials, Record keeping, Planning your regular financial commitments and Employer essentials, while webinar topics may be narrower in focus. We also tailor our workshops and webinars to support key partners or industry groups, such as for ride sharing, an important emerging aspect of the digital economy.

    Voice authentication

    We are improving access to online services via the introduction of voice authentication. Our voiceprint technology is used through the call centre and mobile app. Over 3.7 million voice prints have been registered. We expect this to exceed 4 million by the end of 2018.

    Live chat

    We have a small business live chat service and an after-hours call-back service available Monday to Saturday. You can also ask questions on our peer-to-peer online forum, ATO CommunityExternal Link.

    Small business newsroom email service

    We support small business owners right from the start by auto-subscribing them to our online news and information service to make it easy for them to keep up to date with tax and super news. The newsroom tells small businesses what they need to know, when they need to know it, and how to do it. The Small business newsroom currently has over 2.4 million subscribers.

    See also:

    Supporting businesses from the start

    We are focused on finding ways to reduce the administrative burden on small business.

    Regular communication

    We developed our New-to-business Essentials service as a result of a whole-of-government Small Business Fix-it Squad. Within 30 days of ABN registration new businesses receive the first of a series of four emails they’ll receive during their crucial first twelve months in business, which links to a suite of 24 modules of essential, whole-of-government, education on business.gov.au.

    The Cash Flow Coaching Kit developed by the ATO in collaboration and consultation with public practitioners, small businesses and PWC Indigenous Consulting is designed to be delivered by tax practitioners to their clients. The kit helps alleviate the main reason for small business failures – inadequate acumen when it comes to cash flow management. The Cash Flow Coaching Kit is currently being digitally transformed into an online tool.

    Community engagement

    We make regular visits across the country to show people tools and tips to help their business.

    We engage with small businesses and representative organisations to understand your needs. Our Small Business Stewardship Group connects us with key industry associations.

    We ask small businesses to test products or provide feedback via our Small Business Consultation Panel. Together we can improve our products and services, so you can focus on running your business.

    Simplified reporting

    We have simplified quarterly GST reporting requirements, reducing BAS reporting from seven items to three.

    Helping small businesses avoid debt

    Our goal is to help taxpayers meet their obligations on time and provide tools and services to make this easier.

    Our education approaches are designed to help small businesses build their acumen around cash flow, business management, financial management and tax and superannuation, so that they can avoid getting into debt before it becomes a problem. We know that small business debt is one of the key reasons that small businesses fail, and we seek to help small business prevent this by helping them to get things right from the start.

    Other assistance includes:

    • enabling pre-payments of tax liabilities to assist in managing cash flow
    • sending preventative SMS payment reminders for those likely to pay late or not at all
    • our app enables taxpayers to view their upcoming due dates and set payment reminders in their calendar
    • our app’s business performance check tool lets users quickly check the financial health of their business.

    How we manage debt

    Small businesses may experience short-term cash flow issues, making it difficult to pay on time. As of 30 June 2018, we were owed $23.7 billion in collectable debt, with $15.1 billion (63.4%) related to small businesses.

    It’s important to deal with your debt early while it’s manageable, before it escalates. Even if you can’t pay right now, talk to us so we can help. A taxpayer’s experience when they have a debt will depend on their circumstances and previous payment behaviour.

    Early action

    In 2017–18, we negotiated 790,000 payment plans with small businesses for $15.6 billion. In recent years we have:

    • increased the amount for payment plans via our automated phone service from $25,000 to $100,000
    • enabled sole traders to set up plans for debts up to $100,000 via ATO online for income tax and activity statement debts
    • developed a range of self-service tools and online services to help you stay on track with your tax.

    Firmer action

    We only take firmer action (such as issuing a garnishee) if taxpayers do not deal with their tax debt.

    In 2017–18, we used garnishee powers in approximately 1.1% of all business and individual debt cases.

    See also:

    Stronger action

    We may use legal recovery in relation to a debt, exercising the same rights available to any other creditor. If the business choses, we remain will work with them.

    An independent, external review of our 2018 insolvency cases found our collection practices do not prematurely lead to viable small businesses being bankrupted.

    Of all bankruptcies and wind-ups in Australia in 2017–18 we initiated 6.9%, which is only 0.04% of our debt cases or one in 2,623 debt cases.

    Ultimately, the court decides whether a business is insolvent or not, based on evidence provided by us and the taxpayer.

    Generally, as soon as a matter is objected to any debt recovery actions are halted.

    Records for April 2018 show we have 4,300 disputes on hand – 0.0003% of all taxpayers. Less than 5% of these have recovery action underway.

    Reviews of our debt management approach

    Reviews by the Inspector-General of Taxation and the Australian National Audit Office found no systemic issues in relation to our debt management and we continue to evolve and refine our approach in line with the recommendations of these reviews.

    Our approach to ABNs

    The Australian Business Register (ABR) is a national database where people carrying on or starting a business can register for an Australian Business Number (ABN).

    There are around 7.7 million registered ABNs.

    In 2017–18:

    • around 860,330 new ABNs were registered and over 95% of online ABN applications were instantly approved
    • we cancelled 251,986 redundant ABNs – mainly due to:
      • non-lodgement of tax returns,
      • lodged returns showing no business income, or
      • identified as deregistered companies and deceased individuals.
       
    • 138,835 ABNs were cancelled by the ABN holders themselves.

    In the last Financial year there were over one billion ABN searches completed by businesses and government agencies to check the details of who they are dealing with.

    The register is used by over 550 government agencies to deliver infrastructure planning, emergency services, pre-filling forms and providing information about grants.

    The ABR is a key national dataset and it is critical data is accurate, current and reliable.

    Maintaining the integrity of the ABR

    It is imperative that the community and users of the ABR have trust and confidence in the integrity of the data and our administration of the register.

    The integrity of the register is maintained with the support of the community. The community helps update the register through cancelling ABNs that are no longer required and keeping details up-to-date.

    In 2017–18:

    • 138,835 ABNs were cancelled by the ABN holders themselves, and
    • 251,986 ABNs were deemed as redundant – mainly due to either
      • no evidence that they were still carrying on an enterprise
      • being identified as deregistered companies and deceased individuals.
       

    The best way for a business to show that they are still carrying on an enterprise is to keep their tax return and BAS lodgements up to date.

    Some businesses may incorrectly use ABNs to identify workers as contractors, when they are actually employees. If a worker is an employee, then there is no entitlement to an ABN. The law determines if a worker is a contractor or employee.

    There are also different obligations for employers depending on whether a worker is an employee or a contractor, for example regarding PAYG withholding and super. This is important for ABN applicants to understand before applying for an ABN and get into unnecessary financial obligations and reporting to government.

    Supporting businesses

    We have no preference about whether a business adopts an employee or contractor model.

    If we identify a risk that an ABN holder has been incorrectly classified as a contractor we will engage directly with the employer, or at the broader industry level, and address the issue holistically to:

    • provide input
    • keep them informed of their entitlement to an ABN and associated tax and super obligations
    • work together to minimise impacts.

    Anyone uncertain about how the rules apply can:

    • use the online decision making tool
    • employers can phone us on 13 72 26
    • workers can phone us on 13 28 65.

    Managing disputes

    The use of alternative dispute resolution, such as our in-house facilitation service and settlement is part of our commitment to earlier and more effective dispute resolution.

    In 2017–18:

    • more than 36.5 million returns were lodged
    • 361,107 (1%) adjustments from audits were made
    • 24,350 (0.07%) objections were received – 32% of these objections related to individuals in business and small businesses.
    • 478 (0.001%) cases were lodged to courts/tribunals
    • 102 (0.0004%) cases proceeded to decision.

    We have transformed the way we manage disputes. Some of our successes include:

    • a 60% reduction in Administrative Appeals Tribunal (AAT) applications against our decisions over the last five years
    • 90% of tax litigation decisions were fully or partly favourable to the ATO
    • a 30% reduction in the average time it takes to resolve a dispute since 2015–16.

    In-House Facilitation

    In 2017–18, we received almost 250 referrals for in-house facilitation from individuals and small business taxpayers, almost twice as many as the previous year . Nearly all of our free in-house facilitations in 2017–18 were able to partially or fully resolve the dispute.

    Test case litigation

    Our test case litigation program provides financial assistance to taxpayers where outcomes will clarify the law and develop legal precedent where there is an issue that:

    • requires law clarification
    • affects a significant section of the public
    • has considerable commercial effects for an industry.

    Dispute Assist

    Our new Dispute Assist service also supports small businesses where significant personal circumstances have contributed to their dispute with us.

    The service provides an independent, experienced disputes guide, who provides support and assistance through the process.

    See also:

    Small business independent review

    From 1 July 2018, we are running a 12-month pilot of an Independent Review service for eligible small business taxpayers. An independent technical officer from outside the audit area reviews the decision before an assessment or amended assessment is issued.

    The pilot was first conducted in Victoria and South Australia and is now available nationally. It is crucial in developing our plan for all businesses to have access a review prior to the finalisation of an audit. Eligible businesses with an audit in progress will be contacted and offered the opportunity to participate.

    Small businesses not eligible for the pilot can still seek assistance through our In House Facilitation Service and Dispute Assist, or lodge an objection. Small businesses can also raise their matter with the Inspector-General of Taxation or the Australian Small Business and Family Enterprise Ombudsman.

    Cash and hidden economy

    The cash and hidden economy exists when businesses deliberately hide income to avoid paying tax. It isn’t illegal to operate using cash, but is unfair to do so to avoid paying tax. Over 85% of Australians believe it is unfair to use cash to avoid paying your fair share of tax.

    The cash and hidden economy includes:

    • paying cash wages without keeping records
    • not declaring cash sales
    • not recording online sales
    • other activities to avoid paying a fair share of tax.

    If people hide income or deliberately avoid their obligations by failing to register, keep records or lodge accurately, they are breaking the law.

    In 2016–17, $197 million in tax and penalties was raised from our focus on the cash economy.

    We visited 2,600 cash-only businesses last year to talk about their obligations to lodge returns and pay the correct tax.

    In the first six months of 2017–18, we conducted 5,020 reviews and audits resulting in approximately $143 million in tax and penalties. Our focus is on changing the behaviours in the cash and hidden economy to ensure we are creating a level playing field for honest business.

    Protecting honest businesses

    We protect honest businesses from unfair competition by:

    • matching data from a range of sources
    • using data to check if business income can support the lifestyle of the owners
    • comparing individual businesses with others in the same industry using the small business benchmark
    • using information from customers and the public.

    We want to help protect the honest businesses, so we take firm action on businesses that persist in engaging in unfair behaviour.

    Some interesting facts to note include:

    • seven out of every 10 businesses we contact need to take some kind of corrective action
    • over half of the businesses visited need to improve their record keeping.

    Focus on cash industries

    We’re focusing on industries that have large amounts of cash transactions.

    These include:

    • hair, beauty and related businesses
    • restaurant, café, takeaway and food retailing
    • store based retailing.

    If you have information about someone you think may be deliberately evading tax, you can report it to us confidentially online.

    See also:

    What attracts our attention

    For small business, we pay particular attention to:

    • identifying and dealing with dishonest businesses who seek unfair advantage, hiding income, or avoiding their obligations by failing to register, keep records or lodge accurately
    • business operators and associates with reported income that does not match our lifestyle data indicators
    • businesses that report information different to small business benchmarks for their industry
    • employers not deducting or sending us the PAYG withholding from employee wages
    • employers not paying super
    • employers not paying the correct amount of Fringe Benefits Tax (FBT) or incorrectly accessing FBT concessions
    • businesses registered for GST, but not actively carrying on a business
    • failure to lodge activity statements or income tax returns on a regular basis
    • failure to report income received from government grants and payments
    • incorrect and under reporting of sales.
      Last modified: 26 Oct 2018QC 57212