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  • Small business: the big picture

    Find out how we work with and for small business:

    Help for small business

    We support the choice of small businesses to either self-prepare or use a tax professional. The majority of businesses use tax professionals and we provide a range of products and services to support them.

    We are committed to making it as easy as possible for all small businesses to understand and meet their tax obligations, with an extensive and dedicated focus on:

    • education, prevention and support
    • delivering new tools to make things easier
    • providing personalised information
    • providing customised support for small business when they need it
    • providing resources, information and support to tax professionals to help them assist you.

    We are transforming our culture to focus on client service and early intervention, to improve the experience of small businesses when dealing with us.

    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 ATO online 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 1.8 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’re here to help. We offer free and tailored support services to keep small businesses on track, or help them get back on track. We've also rolled out training for our frontline staff to assist them to better understand clients who are struggling with mental health issues or unexpected life circumstances.

    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 help to understand their obligations, increase their confidence and build essential acumen to be a successful and viable small business.

    We take an evidence-based approach and work with small businesses and their intermediaries. We deliver face-to-face workshops 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 understanding.

    Workshop topics include tax essentials, record keeping, planning your regular financial commitments and employer essentials, while webinar topics may be narrower in focus.

    Voice authentication

    We are improving access to our services via the introduction of voice authentication. Our voiceprint technology is used through the call centre and mobile app. Over 4.2 million voice prints have been registered. We expect this to exceed 5 million by the end of 2019.

    Live chat

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

    Small business newsroom email service

    We auto-subscribe new small business owners to our online news and information service to make it easy for them to keep up to date with tax and super news that's relevant to them. 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 2.5 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 will receive their first email, in a series of four, within their initial twelve months in business. The emails link to a suite of 24 key educational modules on various essential business topics available on Link.

    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 used by tax practitioners with their clients. The kit helps ease the main reason for small business failures – inadequate insight when it comes to cash flow management. The Cash Flow Coaching Kit is currently being 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 their 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. Working collaboratively we can improve our products and services, so small business owners can focus on running their business.

    Simplified reporting

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

    Simpler BAS has made savings of $710 million for 2.7 million eligible small businesses, which equates to about $450 or 7 hours per annum of ongoing savings.

    The savings have been delivered through two components of Simpler BAS:

    1. Simpler BAS reporting – reduces the number of GST questions on the BAS to three and removes the requirement for a 20 question worksheet
    2. Digital bookkeeping solution – option for small business to take up changes to their accounting software to reduce the average number of complex GST classifications from 8–9 down to a simple ‘GST’ or ‘No GST’.

    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 understanding around cash flow, business management, financial management, and tax and superannuation, so that they can avoid getting into debt. We know that debt is one of the key reasons that small businesses fail, and we want to help small business prevent this by helping them to get things right from the start.

    Our 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 ATO app makes it easier for small businesses to:

    • view upcoming due dates and set payment reminders in their calendar
    • quickly check the financial health of their business with the business performance check tool.

    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 income tax and activity statement debts up to $100,000 via ATO online
    • 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 don't 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 chooses to engage with us about a debt, we will work with them to resolve issues in a cooperative manner.

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

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

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

    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 Taxation Ombudsman (IGTO) and the Australian National Audit Office found our processes are consistent with best practices, 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 8 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-lodgment 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 ABR is used by over 602 government agencies to deliver infrastructure planning, emergency services, pre-filling forms and providing information about grants.

    The ABR is a key national dataset and its 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 ABR.

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

    The best way for a business to show that they are still carrying on an enterprise is to keep their tax return and BAS lodgments 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. It is important ABN applicants understand the various obligations associated with having an ABN before applying for one to avoid unnecessary financial obligations and reporting to government.

    See also:

    Supporting businesses

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

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

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

    If you are uncertain about how the rules apply you can:

    Managing disputes

    The use of alternative dispute resolution (ADR), such as our in-house facilitation service and settlement, is part of our commitment to provide 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. These changes have resulted in:

    • 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 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 funds litigation cases that meet test case funding criteria and expectations.

    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, to support and assist the business 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 to 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 and Taxation Ombudsman (IGTO) or the Australian Small Business and Family Enterprise Ombudsman.

    Penalty relief initiative

    We are improving our processes to make it easier for small businesses to get things right and to ensure a fair and consistent approach to the way we administer penalties. Our penalty relief initiative is assisting eligible small businesses with a turnover of less than $10 million, to understand where they made an error and how to get it right in the future, instead of applying a penalty. In its first six months from 1 July 2018, penalty relief reduced false or misleading statement penalties for failure to take reasonable care on small business by 83.8%.

    See also:

    The black economy

    The black economy generally refers to activities that take place outside the tax and regulatory systems, such as:

    • when not all income is declared
    • demanding or paying for work cash in hand to avoid obligations
    • over reporting of deductions
    • other illegal activities.

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

    Our focus is on changing behaviours to ensure we are creating a level playing field for honest business.

    Protecting honest businesses

    We are visiting businesses around Australia to protect honest businesses from unfair competition by addressing black economy activities. This is part of a broader program announced in the 2018 Budget to tackle the black economy by implementing a targeted, stronger and more visible enforcement strategy, as recommended by the Black Economy Taskforce.

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

    If you have information about someone you know or suspect may be participating in phoenix, tax evasion or black economy activity, you can report it to us confidentially through our Tax Integrity Centre (TIC).

    For businesses that are genuinely trying to do the right thing, we will be providing education and assistance to help them get back on track.

    See also:

    Removing tax deductibility of non-compliant payments

    As of 1 July 2019, businesses can only claim deductions for payments they make to their workers (employees or contractors) where they have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment.

    If the PAYG withholding rules require them to withhold an amount from a payment they make to their worker, they must:

    • withhold the amount from the payment before they pay it
    • report the amount to us.

    Businesses won't be able to claim a deduction if they don't withhold PAYG tax or report the PAYG tax to us.

    See also:

    GST on low value imported goods

    From 1 July 2018, online retailers have been collecting GST on goods sold to consumers in Australia valued at $1,000 or less.

    The new rules apply to platforms, merchants and re-deliverers that sell goods from offshore and have a GST turnover of $75,000 or more in a 12-month period. In the case of platforms, they are responsible for collecting GST on goods when sold through them rather than individual merchants.

    If you are GST-registered and buy for your business then GST may not apply to your purchases. If you are charged GST this could be because the supplier has treated you as a consumer. See Information for business purchasers of low value imported goods to determine if you should have been charged GST and how to recover any GST incorrectly charged.

    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 tax returns on a regular basis
    • failure to report income received from government grants and payments
    • incorrect and under reporting of sales.
    Last modified: 25 Oct 2019QC 57212