Shadow Economy Advisory Forum key messages 17 November 2022

Summary of the key topics discussed at the Shadow Economy Advisory Forum meeting on 17 November 2022.

On this page

• Welcome and chair update
• Member updates
• CPA annual Asia-Pacific survey
• Data breach concerns
• Effective media and messaging
• Agency updates
• Other business
• Attendees
• Apologies

Welcome and chair update

Co-chairs Dr Michael Schaper and Deputy Commissioner Will Day, welcomed attendees. There were no conflicts of interest declared, and members were reminded of confidentiality requirements.

Assistant Commissioner Tony Goding was introduced as the forum’s new ATO advisor, replacing Peter Holt. The co-chairs thanked Peter for his efforts setting up and working with the forum.

Member updates

Industry members shared key observations which focussed broadly on current environmental pressures. The discussion noted:

• Difficulties that small businesses experience with cash flow, especially during times of natural disasters and are exacerbated by big businesses that delay paying their supplier bills.
• Supply chain issues, staffing shortages and wage rises continue to place pressure on all industries while business to business transactions remain strong.
• Businesses who pay employees in cash are vulnerable to complaints relating to non-payment of withholding tax or superannuation if the relationship breaks down.
• There are privacy concerns relating to the introduction of the public beneficial ownership registry,
• The retail sector has performed well over the past 18 months due to online shopping but expects lower consumer spending to result from rising inflation rates.
• The increase of interest rates is likely to lead to lower consumer confidence and higher cost of doing businesses, with potential consequence of insolvency wave.

CPA annual Asia-Pacific survey

Gavan Ord provided an overview of the results of the 2021–22 CPA Australia’s annual Asia-Pacific small business surveyExternal Link. It is a quantitative survey of approximately 4,500 small businesses across Australia, New Zealand and Asia. The survey results provide an indicator of the prevalence of the (hidden) cash economy on the small business community.

Australian small businesses showed small but significant differences in comparison with other countries in the Asia-Pacific region. The survey indicated that Australian small businesses are least likely to:

• have a significant reliance on cash sales
• earn revenue from online sales
• have reviewed their cybersecurity in the past 6 months.

The results showed that businesses with 5 to 19 employees are most likely to take cash as part of their business transactions.

The survey also indicated that Australian small businesses have a slow digital uptake, including adoption of new payment options, in comparison to other countries. Australia and New Zealand’s ageing small business demographics combined with minimal new business churn may be having an impact on overall business performance.

Data breach concerns

The Department of Home Affairs estimates that cyber security incidents (leading to fraud and identity crime) cost the Australian economy up to $29 billion per year. Data breaches are often carried out for the purpose of identity theft or fraud by cybercriminals who operate in the shadow economy.

A significant data breach has the potential to wipe out small to medium sized businesses, and often results in lost revenue and interrupted services, as well as significant reputational damage. The penalties imposed for data breaches are also becoming tougher.

The forum discussed the difficulties small business owners experience in managing cyber security threats and identified 3 focus areas for future discussion:

• the need for education on the practical steps that small businesses can take to protect the data they hold
• the general pressures of increasing costs as an inhibitor to investing in cyber security (for example, CPA Australia’s annual Asia-Pacific small business survey results identified that only around 35% of Australian small businesses have reviewed their cybersecurity in the past 6 months)
• how small businesses can protect themselves from unscrupulous cyber security professionals who seek to exploit business vulnerabilities
• advice regarding retention and/or verification of personal and commercial information in an increasingly digitalised environment.

The Office of the Australian Information Commissioner has been invited to speak to the forum.

Effective media and messaging

Stuart Austin, Media Unit, ATO discussed the ATO’s proactive media approach and the July 2022 media release Tipped off: ATO reveals most dobbed-in industries. The release gained excellent traction across national and local media outlets with a potential audience reach of 11.6 million. It demonstrates how an effective proactive media strategy can be used to advocate matters relating to the shadow economy.

The success of the proactive media approach was due to several factors:

• a newsworthy topic to attract attention with new information or data
• providing the media release under embargo to a trusted journalist
• content that is easy for journalists to use for news stories
• availability of a trained media spokesperson.

The ATO will use this approach in future releases on topics relating to the shadow economy, for example: industry-specific, regional and prosecutions.

Members are invited to partner with the ATO to develop industry-specific approaches.

Agency updates

Tony Goding advised that the agency is participating in the Australian National Audit Office’s (ANAO’s) audit of the Black Economy Taskforce recommendations. The ANAO is assessing the effectiveness of the implementation of the government response to the Black Economy Taskforce report.

The update also included an overview of the October 2022–23 Australian Government Budget ATO measures. The Shadow Economy funding has been extended for 3 years from 1 July 2023. The ATO will continue to support to the Black Economy Standing Taskforce and its compliance approaches to levelling the playing field for small businesses.

Funding has also been provided to the ATO to continue leading the Tax Avoidance Taskforce, address over-claiming of personal income tax deductions and participate in the Fusion Taskforce (which will focus on National Disability Insurance Agency non-compliance).

Katie O’Brien, Australian Border Force (ABF) advised the agency is also participating in the ANAO’s audit of the Black Economy Taskforce recommendations.

The forum was advised that ABF also has a community tipoff facility, BorderwatchExternal Link, which captures reports of suspicious border activities.

Geoff Francis confirmed that Treasury is also participating in the ANAO’s audit of the Black Economy Taskforce recommendations. It was noted that the review of legislation banning the use of electronic suppression software is close to completion.

Other business

The 2023 forward meeting schedule will be confirmed. The meeting closed at 12.20 pm AEDT.

Attendees

Apologies