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  • ATO action to reduce the gap

    A range of taxpayer behaviours can affect the gap. These can arise through employers failing to report or withhold PAYG withholding. The main events contributing to this risk include employers:

    • failing to withhold or under-reporting PAYG withholding
    • failing to report or pay withholding on time
    • incorrectly treating employees as contractors.

    These risk events are driven by a range of factors, including:

    • businesses being impacted by unforeseen events, which puts pressure on their cash flow
    • pressure from competitors who are deliberately underpaying staff or avoiding tax obligations to gain an advantage
    • businesses struggling with the distinction between an employee and a contractor.

    We focus our efforts in two main areas:

    • prevention activities to help employers get things right and deal with genuine mistakes
    • correction activities that deal with opportunistic or deliberate behaviour.

    To help employers get it right and promote a level playing field, we:

    • produce online assistance products that encourage voluntary compliance, including an employee/contractor decision tool to work out if a worker is an employee or contractor for tax and super purposes
    • work with digital service providers and actively assist in the transition to Single Touch Payroll
    • conduct information sessions, including seminars, webinars and visits to professional bodies, associations and industry groups.

    Our targeted shadow economy activities focus on:

    • protecting honest employers who comply with their obligations while addressing those employers that choose to wrongly classify employees as independent contractors
    • engaging with employers who choose to use third parties (for example, labour hire firms or payroll service providers) where worker entitlements may be at risk
    • more targeted enforcement actions directed towards those who choose to under report or avoid obligations altogether
    • working in partnership with other government agencies, industry associations and intermediaries to promote tax and super compliance.

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      Last modified: 19 Oct 2021QC 57198