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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.

    The net gap typically ranges from approximately 2% to 3% of the total value of PAYG withholding. It has been significantly revised from prior year estimates, due to external data changes.

    In 2017–18 the net gap was $3.5 billion, or 1.8% of the total theoretical value. Due to some quality issues with data inputs, we made a projection for the 2017–18 estimate by making its gross gap (in percentage terms) equal to that of 2016–17. This led to a corresponding provision made to the theoretical liability amount while keeping the other components unchanged.

    Overall, we observe that the PAYG withholding net gap has been gradually trending downwards. As there are 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 lead to revisions of the gap estimate. We monitor this and engage with the ABS to understand the drivers of this change. 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, 2012–13 to 2017–18

    Element

    2012–13

    2013–14

    2014–15

    2015–16

    2016–17

    2017–18

    Population

    810,414

    808,530

    812,394

    826,389

    835,051

    847,847

    Gross gap ($m)

    5,941

    5,996

    6,810

    6,369

    6,036

    6,466

    Amendments ($m)

    1,334

    1,431

    2,162

    2,367

    2,908

    2,981

    Net gap ($m)

    4,607

    4,565

    4,648

    4,002

    3,128

    3,484

    Tax paid ($m)

    148,279

    155,406

    164,637

    171,910

    178,032

    190,573

    Theoretical liability
    ($m)

    152,886

    159,971

    169,285

    175,912

    181,161

    194,057

    Gross gap
    (%)

    3.9

    3.7

    4.0

    3.6

    3.3

    3.3

    Net gap
    (%)

    3.0

    2.9

    2.7

    2.3

    1.7

    1.8

    Figure 1: PAYG withholding gross and net gap percentages, 2012–13 to 2017–18

    Figure 1: Image shows the gross and net gap in percentage terms as outlined in Table 1.

    Note: The estimates for the later years (2016–17 and 2017–18) are subject to revision due to updated ABS data.

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      Last modified: 19 Oct 2020QC 57198