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  • Small business income tax gap

    In this document, you'll find information about estimating the small business income tax gap. This gap forms part of our overall tax performance program.

    There are over four million small businesses in Australia. They contribute around 30% of income tax paid. The small business population comprises a diverse range of structures and operations. It covers business with a turnover of up to $10 million.

    Small business operating structures can include:

    • companies
    • sole traders
    • small business proprietors
    • trusts
    • partnerships.

    The taxation of small business income differs depending on the structure of the business, turnover and relevant tax rates for the income year.

    When calculating the income tax gap, our primary focus is on entities that have an income tax obligation. In our small business population, this includes:

    • companies with a turnover up to $10 million
    • individuals associated with small business (including partnerships, trusts and companies with a turnover up to $10 million)
    • sole traders receiving business income up to $10 million.

    Around 96% of small businesses seek advice and services from a tax practitioner to help operate their businesses. This may be an accountant, tax agent, BAS agent or bookkeeper.

    For 2017–18 we estimate the net income tax gap for the small business population to be $11.1 billion or 11.5%. In other words, we estimate that small business paid more than 88% of the total theoretical tax payable in 2017–18.

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      Last modified: 19 Oct 2020QC 59986