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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 4% of the total value of PAYG withholding. It has been significantly revised from prior year estimates, due to external data changes.

    In 2016–17 the net gap was $3 billion, equating to 1.7% of the total theoretical value.

    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 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 2017–18. The UK has also seen a considerable decline in their PAYE gap over recent years.

    Note that amounts reported in this estimate are rounded to the nearest $ million or $ billion, as relevant for the calculation.

    Table 1 shows the theoretical liability for PAYG withholding, as well as revenue reported, adjustments, and gross and net PAYG withholding gap estimates for the period 2011–12 to 2016–17.

    Table 1: PAYG withholding gap 2011–12 to 2016–17

    Element

    2011–12

    2012–13

    2013–14

    2014–15

    2015–16

    2016–17

    Theoretical PAYG withholding
    ($m)

    145,349

    150,998

    157,999

    167,215

    173,717

    178,899

    Impact of the black economy
    ($m)

    1,825

    1,888

    1,973

    2,093

    2,174

    2,231

    Adjusted theoretical PAYG withholding
    ($m)

    147,173

    152,886

    159,973

    169,308

    175,891

    181,130

    PAYG paid
    ($m)

    140,997

    148,281

    155,423

    164,740

    172,020

    178,084

    Gross gap
    ($m)

    7,237

    5,903

    5,940

    6,793

    6,192

    6,044

    Amendments
    ($m)

    1,060

    1,298

    1,390

    2,226

    2,321

    2,998

    Net gap
    ($m)

    6,176

    4,604

    4,550

    4,568

    3,871

    3,046

    Gross gap
    (%)

    4.9

    3.9

    3.7

    4.0

    3.5

    3.3

    Net gap
    (%)

    4.2

    3.0

    2.8

    2.7

    2.2

    1.7

    Note: The results provided in this estimate for the years 2015–16 and 2016–17 are considered preliminary as they are more likely to be subject to revision, in line with the National Accounts data sets administered and revised by the ABS.  

    Figure 1 displays the trend in tax reported and the net PAYG withholding gap over the same period.

    Figure 1: Amount paid and net gap – PAYG withholding, 2011–12 to 2016–17

    Figure 1: This graph shows the amount of PAYGW paid and the net gap stated in Table 1 for the years 2011–12 to 2016–17

    Data sources: ABS, ATO, Treasury.  

    Figure 2: PAYG withholding gross and net gap percentages

     Figure 2: This graph is a pictorial representation of the PAYGW gross and net gap percentages stated in Table 1 for the years 2011–12 to 2016–17

    Note: The estimates for the later years (2015–16 and 2016–17) are subject to revision due to updated ABS data.  

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      Last modified: 17 Oct 2019QC 57198