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
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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