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  • Small business income tax gap

    This information is 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.

    The latest estimate of the net small business income tax gap for 2018–19 is $12.5 billion or 12.7%. In other words, we're estimating small business to have paid around 87% of the total theoretical tax payable in 2018–19. This estimate is preliminary and subject to revision.

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      Last modified: 19 Oct 2021QC 59986