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  • Individuals not in business income tax gap 2015-16

    This information is for historical purposes only. If you need previously published content for past estimates, email taxgap@ato.gov.au.

    The individuals not in business income tax gap is an estimate of the difference between the total amount of tax we collect from individual taxpayers (excluding people who are running a business), and the amount we estimate we would collect if every one of these taxpayers was fully compliant with the law.

    Individuals who are not in business are salary and wage earners and investors. Since we last published the individuals not in business tax gap, we have refined the definitions used to describe individuals in business and high wealth individuals. These individuals are now covered in other areas of our tax gap program. Our population definitions can be found in Australian tax gaps – overview.

    For the purposes of this estimate, there are currently around 10.5 million individuals lodging tax returns who were not in business in 2015–16. These taxpayers predominantly use an intermediary to prepare their tax return, with around 67% lodging tax returns through a tax agent in 2015–16.

    Our estimate for this gap covers a three-year period, from 2013–14 to 2015–16. We estimated the gap from the results of random enquiry programs relating to tax returns lodged by individuals who are not in business. We reviewed the tax returns of a random sample of taxpayers for the respective years, and then applied the results to the broader population. This approach is considered best practice for a group this size.

    Estimate of the tax gap

    For 2015–16 we estimate a net tax gap of 6.4% or $8.4 billion. In other words, we estimate that individuals not in business paid over 93% of the total theoretical tax payable in 2015–16.

    Two of the main components driving the gap include incorrect claims for:

    • deductions for work-related expenses
    • omitted income, particularly in relation to undeclared cash wages (an element of the black economy).

    Another contributor is deductions for rental property expenses.

    At this stage, we have three years of sample results, and are starting to draw preliminary conclusions around long-term trends of the net gap. We will provide trends in later years as we continue our work on estimating and reducing the gap.

    The Tax and individuals not in business document explains the issues and behaviours we see that contribute to these areas of concern and the strategies we have in place to manage them.

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      Last modified: 06 May 2021QC 65544