ASBFEO reflections on first two months
The Honourable Bruce Billson provided reflections on his first two months as the Australian Small Business and Family Enterprise Ombudsman (ASBFEO).
Under the ASBFEO Act, the Ombudsman’s assistance function is periodically reviewed. The formal consultation period for the current reviewExternal Link has closed. However, insights are still welcome while the head reviewer, Ms Carmel McGregor, concludes her report. The report is due to the Minister responsible for small business no later than 19 June 2021.
ASBFEO’s current priorities include helping businesses defend their economic rights against fundamental breaches of industry codes and helping them increase their digital engagement.
Economic recovery, worker classification issues and labour shortages require further work. There is still concern about access to insurance, which is inhibiting small businesses engaging in the economy.
Members asked about insolvency reform measures and rental matters.
The Ombudsman noted he supports the insolvency measures, however there has been minimal take-up of them. ASBFEO will continue their endeavours to make them work more effectively.
A meeting was held with the state-based Small Business Commissioners focusing on commercial lease issues. The Ombudsman summarised the types of issues being seen across the country, with the majority involving disputes over the fundamental facts. About 75% of cases are straightforward and resolved in a couple of days.
Agency updates
ATO
The Online services for business transition is tracking well, with 64% of users moving from the Business Portal to the new platform. Seventy-four per cent of feedback received to date has been positive or neutral.
The ATO is working with the Australian Curriculum, Assessment and Reporting Authority to include tax and superannuation content in the new Australian curriculum. In April 2021, the draft curriculum was released for consultation. This includes a unit called, ‘The role of Australia’s system of taxation,’ for year eight students.
Members discussed our approach to the shadow economy, noting face-to-face visits to businesses are still on hold. The ATO confirmed while there has been a considerable drop off in the use of cash, the shadow economy still is a focus.
An environmental scan was recently completed to understand how the shadow economy risk has changed. This scan found there is still a lot of cash hidden which is not being circulated. Many businesses came on to the books to access recent stimulus measures. The challenge now is to keep them in the system.
Action item |
20210518-1 |
Due date |
31 August 2021 |
Responsibility |
Small Business Stewardship Group (SBSG) Secretariat |
Action item details |
Queensland University of Technology small business viability project
Table this topic for discussion at the August SBSG meeting. |
Members requested information on the ATO’s current compliance approach, based on conflicting anecdotal reports. The ATO confirmed no new risks in behaviours were identified within the last phase of JobKeeper. While new compliance activity was paused in 2020, more than 50% of small businesses wanted pre-existing activities to continue. New compliance activity has recommenced with a focus on pre-issue refund integrity checks. Our focus is on egregious behaviour and Tax Integrity Centre referrals.
A member confirmed while they are seeing media reports of the ATO taking ‘harsh actions’, this is not reflected in the experience of the professional associations.
Treasury
A member raised an enquiry regarding Temporary full expensing (TFE) and the intersection with small business pooling rules potentially leading to ‘lumpy’ incomes and cash flows. Treasury noted pooling rules are consistent with previous arrangements under the simplified depreciation regime, which is designed to reduce complexity and compliance costs for small businesses. Guidance regarding these rules is available on the ATO website. Small businesses can choose to opt out of the simplified depreciation regime for an income year and apply the general depreciation rules to depreciating asset purchases in that year, including TFE on an asset-by-asset basis.
Members requested simplifying the communications about instant asset write-off, temporary full expensing and other depreciation provisions to assist small businesses’ understanding of these inter-related measures.
Superannuation and Single Touch Payroll
Single Touch Payroll
A tailored nudge campaign will commence for employers who are still not using Single Touch Payroll (STP). This will include notification that penalties may apply.
Our key focus areas for engagement in Phase 2 are:
- supporting digital service providers (DSPs)
- three initial tranches of guidance – two tranches have been published with a more detailed Phase 2 Employer Guide on track to be published in June 2021
- a refreshed STP Advisory Group and Employer Transition Working Group – formed to focus on employer transition issues.
A livestream event held in March was successful with 2,200 individuals participating. The ATO and Services Australia presented an overview of upcoming STP Phase 2 changes.
The ATO outlined the criticality of STP in delivering stimulus measures as well as in informing policy and our JobKeeper compliance approaches.
Members discussed the ‘hearts and minds campaign’ that is necessary to drive ongoing take-up. The ATO acknowledged the need to focus on clearly communicating the value proposition for STP Phase 2.
Members were asked to provide any additional feedback about STP Phase 2 by 4 June 2021.
Superannuation new measures
The removal of the $450 per month threshold for super guarantee (SG) was identified as having the most impact for small business.
This measure applies from 1 July 2022. Under this measure, under-18s and domestic workers still need to work 30 hours a week to be eligible for SG.
Members were generally supportive of the measure as beneficial to community, particularly for younger workers. It was also noted the measure will increase costs. Rosters for staff under 18 years old will need to be monitored and, where they work more than 30 hours a week, SG will need to be paid to them.
Your Super, Your Future
This measureExternal Link is a matter for government waiting for legislation to pass, subject to a report from the Senate Economics Committee. The implementation date remains 1 July 2021.
The ATO is designing retail and wholesale digital solutions for the Stapled Super Fund service. The retail solution will form phase 1 and involve ATO online services and phone capability. Phase 2 will deliver a wholesale solution for integration into business management and payroll solutions by 1 July 2022.
Members requested that the ATO and government consider a transition period for small businesses due to tight timeframe for implementation.
Post-meeting update – The measure received Royal Assent on 22 June 2021. Additional information about this measure was issued to SBSG members on 24 June 2021.
Superannuation guarantee – remission of Part 7 penalty
The ATO is revising the Part 7 penalty remission policy to encourage positive behaviour and distinguish between recidivists and those trying to do the right thing. The approach can only apply to non-amnesty SG quarters, and there are legislative restrictions on the Commissioner’s ability to remit the Part 7 penalty for SG amnesty quarters where no super guarantee charge statement is lodged prior to ATO audit.
A member endorsed the ATO approach as taking a more measured approach for remission of Part 7 penalty which considered the correct factors for remission of Part 7 penalty for non-amnesty SG quarters.
A member described the administrative burden in resolving an apparent discrepancy between information held by a super fund and the ATO. It was very manual and laborious.
Members raised issues about payments made but not processed in time by the superannuation fund. The ATO will follow-up on this issue out-of-session.
A member raised the issue of why penalties associated with SG do not go to the employee who will have forgone earnings due to the late contribution. The ATO responded that this is a policy matter for government.
Members were asked to provide any additional feedback by 4 June 2021.
Member discussion
The level of fatigue being experienced by the small business community should be considered when making policy or administrative changes. There are a lot of changes across government, and many small businesses are struggling to recover from 2020. Small business advisers are also struggling to cope with the current volume of change.
A member suggested ASBFEO should have a more active role in coordinating changes across government to help small businesses navigate the system. Without creating another forum, there is a need to oversee policy changes and address broader issues such as the multiple definitions of small business.
There have been positive outcomes over the last 12 months in the automotive industries, including changes of franchising codes. The Motor Trades Association is publishing a paper on COVID-19’s impact on the industry.
COVID-19 continues to impact Indigenous businesses, particularly in the tourism industry.
Due to global supply chain uncertainty, many businesses in the direct selling industry have increased stock levels. This has led to recent cash flow problems as sales have softened.
Some state authorities have commenced compliance activities that are adding extra pressure on small business owners and causing mental health concerns.
Other members raised issues relating to ongoing labour shortages. This is often associated with the inability to source affordable accommodation in regions.
The number of people using their downtime to upskill via online courses run by Business Enterprise Centres has increased due to COVID-19. This is a good news story.
E-invoicing
The ATO ran a survey through the ATO’s Small Business Consultation Panel to address the gaps in our understanding of small business invoicing practices and to better understand how e-invoicing effects small business.
Promoting e-invoicing will be very important, with many respondents stating they had not heard of e-invoicing. In January 2021, we had 182 small businesses registered for e-invoicing. This has now grown to over 2,200.
Many small businesses surveyed, along with other stakeholders, are concerned about the ATO’s involvement in e-invoicing. Many small businesses are afraid the ATO is involved in e-invoicing as part of its compliance work. To begin addressing these concerns, the ATO is working with the Department of Industry, Science, Energy and Resources to publish new web content on business.gov.au before the end of the financial year. In the recent Budget announcements, e-invoicing was part of the Digital Economy Strategy which included a campaign that will hopefully assist with perceptions around e-invoicing being used by government to monitor transactions.
The pilots on the Champions Adoption Network focus on larger business and government. ASBFEO would like to lead a small-to-small business pilot, given the volume of those transactions.
Some trusted advisers have expressed hesitation around the value messaging for e-invoicing and work needs to be done to address those concerns.
A member commented that the inclusion of additional details would be helpful in the ATO’s list of software providers. Small businesses are looking for information about which software they can afford.
A member commented that e-invoicing should not create a divide where some small businesses are paid faster. However, there are already several arrangements in place where e-invoicing does mean shorter payment times. This is an incentive to take up e-invoicing.
Members observed that while drafting an invoice takes five minutes, a lot of time is spent preparing and negotiating invoices, re-drafting invoices and reconciling payments. E-invoicing will need functionality to support this activity, so it does not become an administrative burden.
Members asked if e-invoicing will report to the ATO in the future because there is also a link with invoicing and industry-based software tools. For example, where a business uses specialised invoicing software that is linked to customer files and aggregated data is then transferred to accounting software. The ATO clarified that there is no government policy to extract any detailed information from e-invoicing. Work is being done to ensure e-invoicing will integrate with industry-based software tools.
The group discussed security incentives that should be used to promote e-invoicing and that, in the future, the ATO brand should be removed from e-invoicing. The ATO should encourage software companies to promote adoption. The trusted adviser members support e-invoicing and suggested bookkeepers and accountants should be involved to assist the rollout.
Challenges may arise in retail industry without paper invoices, as these are used to record and reconcile deliveries. Reduced payment terms are good for cash flow, but it is difficult to replace a paper invoice.
Members were divided about whether e-invoicing should be a standalone product or bundled into a broader digital engagement package.
Debt and Lodgment – our engagement approach
The ATO’s strategic approach recognises the importance of enhancing certainty for clients and the community. The aim is to ensure that clients:
- have certainty of their net tax position
- understand what they need to do
- know how to seek help if needed
- know what to expect from us in terms of the actions we may take to engage with them.
The vast majority (around 70%) of small businesses pay on time and our predominant strategy is to support and assist them. If a small business is facing challenges meeting their lodgment or payment obligations, they should reach out to their tax representative or contact the ATO to discuss what support may be available.
Members were supportive of the ATO’s engagement approach to debt and lodgment. A member commented on the value of being able to tailor payment plans to suit a small business. Tailored payment plans can be created using online services and do not necessarily require a conversation over the phone with the ATO.
The ATO explained that clients who use the ATO’s new payment reminder service have an 87% likelihood of fulfilling their arrangements.
We are introducing a category for payment plans in arrears, to provide an opportunity for clients to get back on track rather than have the payment plan default and have to start again.
A member asked if a client can have multiple payment plans in place for different debts. If the debts are on the same account, we would prefer the payment plans to be combined.
Action item |
20210518-8 |
Due date |
4 June 2021 |
Responsibility |
Members |
Action item details |
Feedback on the Debt and Lodgment Approach
Members to provide out-of-session feedback on the Debt and Lodgment Approach document included in the meeting papers by 4 June 2021. |
Disclosure of Business Tax Debt measure
Members were provided with an update on the Disclosure of Business Tax Debt measure which received royal assent on 28 October 2019 and took effect on 21 February 2020. The ATO has been working with stakeholders on the implementation plan. Businesses that meet the reporting criteria will be notified in writing and given 28 days to take action to pay their debt or set up a payment plan to avoid having their tax debt reported. Businesses actively working with the ATO to pay their tax debt will not be reported to Credit Reporting Bureaus (CRBs).
The ATO advised that while the threshold for this measure is a debt of $100,000 outstanding for more than 90 days, the median debt in the population is around $350,000. There is currently a total in-scope population of around 8,000 taxpayers.
The ATO will first write to taxpayers to notify of the intention to disclose. Taxpayers will have 28 days to engage with the ATO and take action in relation to their debt before disclosure will be considered. The letter will advise taxpayers of the action they can take to ensure they do not have their tax debt disclosed to CRBs. The primary options are to pay the debt, enter into a payment arrangement or, where the taxpayer disagrees with the debt, lodge an objection.
A member asked for clarification on the qualification and classification level of ATO staff reviewing cases before they are reported to CRBs. The ATO confirmed that staff will be specifically trained to ensure reporting is done appropriately and there will be oversight by senior ATO officers.
Consumer Data Right
Treasury continues to consult extensively on the rollout of the Consumer Data Right rulesExternal Link.
Members discussed the current requirement for the accounting profession to become accredited data recipients. They flagged this requirement could result in additional red tape for privacy and data handling requirements. Members noted that small businesses already share their accounting data with their accountants and requiring them to obtain approval from their digital service provider is problematic.
Treasury advised the establishment of a category of non-accredited parties to receive data as trusted advisors is being developed. Professions identified by the government to become potential trusted advisers include accountants, tax agents, lawyers and bookkeepers. On 30 April, Treasury announced the development of rules to this effect in a media releaseExternal Link.
Treasury noted that Consumer Data Right (CDR) is not intended to be a barrier between the consumer and the professionals they engage, clarifying that the consumer ultimately needs to provide consent about how their data is used.
A member asked what problem CDR is solving. Treasury advised that consumers are currently sharing their data but do not have the access to derive benefit from it. CDR has been introduced in Australia to help people make the most of their data and it will deliver broader benefits to industry and the Australian economy.
Post-meeting update – CDR contact details were circulated to members on 28 June 2021.
Other business
Micro-businesses can now access services under the New Enterprise Incentive Scheme.
The Employment Contract Tool has launchedExternal Link. It guides employers through a series of questions to generate an employment contract based on the specific terms and conditions of the relevant award their business operates under.
Attendees
Organisation |
Member |
|---|---|
ATO |
Deborah Jenkins (Co-chair), Small Business |
ATO |
Andrew Watson, Small Business |
ATO |
Vivek Chaudhary, Debt and Lodgment |
Australian Retailers Association |
Jessica Yu |
Australian Small Business and Family Enterprise Ombudsman |
Bruce Billson (Co-chair) |
Australian Veterinary Association |
Moss Siddle |
Business Enterprise Centres Australia |
Graham Baxter |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Department of Industry, Science, Energy and Resources |
Peter Cully |
Direct Selling Association of Australia Inc |
Gillian Stapleton |
Indigenous Business Australia |
Greg Ellis |
Institute of Certified Bookkeepers |
Matthew Addison |
Motor Trades Association of Australia |
Richard Dudley |
Real Estate Institute of Australia |
Jock Kreitals |
Restaurant and Catering Industry Association |
Thomas Green |
Small business operator |
Deborah Cook |
Small business operator |
Tony Sama |
Treasury |
Bede Fraser |
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Cameron Sorensen, Debt and Lodgment |
ATO |
James O'Halloran, Economic Stimulus Branch |
ATO |
Jason Lucchese, Superannuation and Employer Obligations |
ATO |
Katherine Philp, Debt and Lodgment |
ATO |
Les De Wind, Debt and Lodgment |
ATO |
Michelle Allen, Superannuation and Employer Obligations |
ATO |
Natascha Bowett, Enterprise Solutions and Technology |
ATO |
Perry Liolios, Enterprise Solutions and Technology |
ATO |
Sally Bektas, ATO Corporate |
ATO |
Thyda Heng, Client Engagement Group Services |
ATO |
Tracy Littlewood, Superannuation and Employer Obligations |
Australian Chamber of Commerce and Industry |
Daniel Popovski |
Council of Small Business Organisations Australia |
Alexi Boyd |
Council of Small Business Organisations Australia |
Castaly Haddon |
Treasury |
Jessica Robinson |
Treasury |
Jodie Ross |
Apologies
Organisation |
Member |
|---|---|
ATO |
Dana Fleming, Superannuation and Employer Obligations |
ATO |
Michelle Crosby, Commonwealth Business Registry Services |
Australian Chamber of Commerce and Industry |
Ross Lambie |
Australian Lottery and Newsagents’ Association |
Michael Renshaw |
Council of Small Business Organisations Australia |
Peter Strong |