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  • Trends and latest findings

    There is generally a high level of voluntary compliance in the PAYG withholding system. We estimate that employers are paying about 97% of the PAYG withholding they are required to, without intervention from us. In 2018–19 the net gap was $3.4 billion, or 1.6% of the total theoretical value.

    Overall, we observe that the PAYG withholding net gap estimates have been gradually trending downwards. Some of the estimates have been significantly revised from those of prior years as a result of external data changes. Given the margins of error due to limitations in the methodology, caution needs to be taken when looking at individual-year results. We note that weak wage growth, as indicated by Australian Bureau of Statistics (ABS) data, flows through to the gap measurement.

    Measurement differences between the PAYG withholding data and the ABS Compensation of Employees data continue to drive revisions in the gap estimates. We monitor this constantly and engage with the ABS to understand the drivers of those differences. Some potential causes include ongoing suppressed wage growth reflected in the National Accounts, reductions in small employers in the market, and shifts from more traditional employment to other working arrangements.

    Australia’s PAYG withholding gap is slightly higher than similar estimates made by the United Kingdom's pay as you earn (PAYE) gap of 1.0% for 2018–19. The UK has also seen a considerable decline in their PAYE gap over recent years.

    Table 1: PAYG withholding gap, 2013–14 to 2018–19

    Element

    2013–14

    2014–15

    2015–16

    2016–17

    2017–18

    201819

    Population

    808,530

    812,394

    826,389

    835,051

    847,847

    855,591

    Gross gap ($m)

    6,085

    6,761

    6,553

    5,976

    6,412

    6,847

    Amendments ($m)

    1,431

    2,162

    2,367

    2,908

    2,981

    3,471

    Net gap ($m)

    4,654

    4,599

    4,186

    3,068

    3,431

    3,377

    Tax paid ($m)

    155,406

    164,637

    171,910

    178,032

    190,891

    204,132

    Theoretical liability
    ($m)

    160,060

    169,236

    176,096

    181,100

    194,322

    207,509

    Gross gap
    (%)

    3.8

    4.0

    3.7

    3.3

    3.3

    3.3

    Net gap
    (%)

    2.9

    2.7

    2.4

    1.7

    1.8

    1.6

    Figure 1: PAYG withholding gross and net gap percentages, 2012–13 to 2018–19

    Figure 1 depicts the gross and net gap in percentage terms, as outlined in Table 1.

    Note: The estimates for the later years (2017–18 and 2018–19) are subject to revision due to updated ABS data.

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      Last modified: 19 Oct 2021QC 57198