Show download pdf controls
  • How we measure tax gaps

    Our estimates aim to quantify the level of non-compliance across the four pillars of compliance – registration, lodgment, reporting and payment obligations. Where possible, we also estimate the amount of revenue not collected from those who do not register or lodge. Penalties and interest are not included in gap estimates.

    We have two measures of the tax gap:

    • The gross gap, which is the difference between    
      • the amount voluntarily reported to the ATO
      • the amount we would have collected if every taxpayer was fully compliant with tax law (that is, the theoretical tax liability).
       
    • The net gap, which is the difference between    
      • the total amount reported (the amount voluntarily reported to the ATO, plus amendments as a result of compliance activities and voluntary disclosures)
      • the amount we would have collected if every taxpayer was fully compliant with tax law.
       

    Tax gap concepts

    We estimate gaps for the year the economic activity occurred. They are historical and based on the law and the administrative approaches at the time they are calculated.

    Figure one shows the components of the tax gap, including the net gap, the gross gap, the amount reported and theoretical tax liability.

    Figure 1: Components of tax gap

    Figure 1: This diagram shows the tax gap concepts. We look at the amount voluntarily reported, amendments due to compliance activities and voluntary disclosure, and the amount not paid, against the theoretical tax liability. The amount not paid is the next gap. The amount not paid plus the amendments is the gross gap.

    Return to:

      Last modified: 17 Oct 2019QC 53168