Director ID
The Australian Government is introducing director identification numbers (director ID) to help combat illegal phoenix activity. This will be the first new service introduced under the Modernising Business Registers program.
We are preparing a private beta test of the new system for when the law commences. We are also working with intermediaries, digital service providers, associations and other government agencies to use natural touch points for educating people about director ID and when they need to apply.
Transitional arrangements will be available to provide the 2.7 million existing directors, and around 200,000 directors newly appointed each year, time to become familiar with the new requirement.
Member discussion
The group discussed whether owners of incorporated small businesses really understand they are directors and the obligations associated with these roles.
A member suggested that sending information to small businesses upon registering for a company Australian Business Number could help educate new company directors about their obligations.
Single Touch Payroll
Single Touch Payroll Phase 1 overview
The ATO presented our insights from Single Touch Payroll (STP) Phase 1, including:
- 78% of small employers are reporting via STP. For the 5–19 employees segment, we have 97% reporting.
- Those small employers that have closely held payees have until 1 July 2021 to report their closely held payees. All other employees should be reported through STP now.
- Approximately 4% of small employers have used a low or no-cost STP enabled software solution.
Single Touch Payroll Phase 2 overview
In the 2019–20 Federal Budget, it was announced that data collected through STP would be expanded to streamline government reporting obligations and support administration of the social security system. The ATO has designed a system that fits around existing payroll systems and processes, while still enabling us to capture additional information.
Our primary focus to date has been engaging with digital service providers to ensure the correct infrastructure is in place. We will soon ramp up communication activities to support the business community.
A key change in Phase 2 is disaggregating gross employment income. Defining the components of income provides greater visibility to the types and amounts of income to which different treatments apply.
Employers should not need to adjust their payroll processes, as pay codes already exist in payroll systems. However, they need to ensure their current pay codes are correctly mapped to and reported as gross income.
Single Touch Payroll Phase 2 – Employer and Intermediary Guidance Roadmap
The ATO provided an overview of key guidance work underway:
- Guidance material and an overview fact sheet of the changes were released on 19 March 2021.
- A general employer guide will be released in mid-April with a complex employer guide due in late May.
- The mandatory start date has been extended from 1 July 2021 to 1 January 2022 due to COVID-19. We have put a deferral framework in place to allow employers time to get processes in place for the transition.
Member discussion
The majority of employers will likely need to re-visit their payroll system for every employee to ensure their systems are correctly set-up for Phase 2 which creates additional work and complexity.
The ATO acknowledged we need to clearly communicate how onboarding to STP will reduce an employer’s reporting burden in the long term.
Members raised concerns that STP Phase 2 seems to be being rushed out because of how quickly JobKeeper was rolled out last year.
The ATO recognises STP changes are significant. We are consulting with many external forums. As this is a software-driven process, our initial focus has been on digital service providers. Our focus is now shifting towards helping individual employers embrace and implement Phase 2.
A member suggested we should consider an employer’s existing reporting obligations with state payroll taxes and the Australian Prudential Regulation Authority. Much of the additional information required is already captured through both reporting processes.
The ATO has been engaging with the states and territories throughout the process to ensure alignment between the information we are capturing and payroll tax reporting.
Reporting through STP is currently a multi-step process involving several systems, forms and websites. The intent of STP Phase 2 is to digitise this into one simplified process.
Small business tax
Part one: Strategic initiative – Improving small business tax performance
The ATO’s ‘Improving small business tax performance’ strategic initiative will initially focus on small employers and small businesses operating through a company structure.
Draft problem statements have been prepared to explore potential focus areas for improving small business tax performance. The ATO will partner with external stakeholders in a ‘co-creation process’ later this year.
The ATO’s aim is to identify problems that we can address administratively by 2024 and are not dependent on law change.
We are in the process of collecting data from our systems to explain what the problems are before starting external engagement and proceeding to the co-creation process.
Member discussion
A member suggested the data we are gathering could be used to improve the small business experience by providing clients with insights about their own business. For example, writing to small businesses lodging returns and activity statements within certain parameters to assure them no further action will be taken.
The ATO is considering options that utilise data to give insights to businesses. We have previously piloted ‘certainty’ letters but found they did not achieve their intended purpose.
Members discussed using the data to offer pre-filled tax returns that provide the option to accept a default return. Some concerns were raised about pre-filling business tax returns. A member questioned whether using ATO and external data may convey to businesses they do not need to keep records. They suggested it would be preferable for the ATO to be transparent about our use of external and third-party data.
A member queried our use of the word ‘performance’ in the problem statements, suggesting ‘compliance’ may be more appropriate terminology for describing the project’s focus.
The ATO clarified that we do not want to limit this work to compliance and is seeking broader solutions.
Part Two: Changing nature of work patterns and possible implications for the tax system (Treasury)
Changes in work patterns and remote working were already being driven by automation, technology and globalisation. COVID-19 has accelerated these changes. The extent to which this will continue is unclear.
The group discussed possible implications of these changes, including for the tax system.
Member discussion
Employees are spending less time and money in city centres and more in their local communities.
Regional areas are being revitalised with the influx of young people able to work remotely and choosing ‘portfolio careers’, where they work several jobs on a part-time basis. Pay as you go withholding requirements should be reviewed to cater for portfolio careers.
Working from home will have huge ramifications for employee retention over the next five years. Employees increasingly value flexible working options.
Small businesses are focusing on delivering customer service based on changing customer expectations.
Access to staff is a major issue and will be ongoing for some industries and locations.
Members agreed working from home is here to stay in the medium to long term. NSW Treasury has released papers from an intergenerational reportExternal Link, stating it will be a permanent change.
Members noted ongoing working from home arrangements raise questions which may require policy review, including:
- Consideration should be given to making travel from home to the office a tax deduction for employees working a split between home and the office. From a behavioural economics perspective, this may support employers to motivate staff to return to the office.
- For employees, working from home may turn their home into a place of a business for capital gains tax.
- Employers will not provide all equipment, so employees will need to apportion private and work-related use of equipment to determine an appropriate deduction for work-related expenses.
COVID-19 saw about six years’ worth of e-commerce uptake. People are using technology to find the best price even if they are shopping locally. This is squeezing the margins of traditional retailers.
Consumer behaviour has changed significantly – this could be a useful frame for considering the pandemic’s broader economic and tax implications.
Agency updates
ATO
The ATO is recommencing business-as-usual work including reviews and audits. We are issuing calls to action encouraging businesses to engage us or their agent regarding outstanding debt and lodgments. Clients with outstanding debt are encouraged to access self-serve payment arrangements.
The ATO recognised there was some concern in the community about our debt re-engagement strategy and that we are taking a measured approach to this strategy.
Members said there is need for further transparency regarding the ATO’s debt approach as there are some mixed messages in the community and in the media.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
The ASBFEO’s phase 2 paper, A tax system that works for small businessExternal Link, was published on 3 March. Members are encouraged to provide feedback on the report and its recommendations.
The ASBEFO is seeing an increase in insolvencies over the last few months, which has been expected. Payment times are improving in some areas according to CreditorWatchExternal Link.
An emerging issue has been identified with digital companies providing services (that is, search optimisation) to small businesses that are either low quality or exploitative. Many small businesses with limited digital capability are vulnerable to signing long-term contracts with digital providers that may not be good for them.
A member raised an ongoing challenge regarding getting information to small businesses about what digital services government can provide (that is, Australian Small Business Advisory Services Digital SolutionsExternal Link).
Regarding the recently announced insolvency provisionsExternal Link, accounting bodies are seeing very low take-up.
Treasury
ConsultationExternal Link has concluded on a proposal to allow education and training expense deductions for individuals completing training that is not related to their current employment. A range of views were received on the proposal. The government is currently considering stakeholder feedback.
Concerns were raised about Consumer Data RightExternal Link (‘open-banking’) potentially disrupting small business. Treasury offered to provide a presentation on this issue at our next meeting.
Department of Industry, Science, Energy and Resources
Since the Payment Times Reporting SchemeExternal Link commenced on 1 January 2021, there has been extensive engagement with large businesses who are preparing to report for the first time on their payment times performance in the second half of this year.
The Employing Your First Person Taskforce is finalising its employment contract tool, which is designed to help small businesses create an employment contract for new employees. The tool is likely to be released at the end of March 2021.
Meeting close
The ATO is considering holding an ad hoc meeting before the May meeting, possibly focussed on our debt re-engagement approach and our consultation and communication priorities.
Co-chair Deborah Jenkins thanked outgoing ASBFEO Ombudsman Kate Carnell for her support of the group and in her role as co-chair. Bruce Billson was welcomed as incoming Ombudsman.
Attendees
Organisation |
Attendees |
|
|---|---|---|
ATO |
Deborah Jenkins (Co-chair), Small Business |
|
ATO |
Amber Robinson (Secretariat Support), Small Business |
|
ATO |
Andrew Watson, Small Business |
|
ATO |
Elyse Cox (Secretariat), Small Business |
|
ATO |
Grant Brodie, Client Account Services |
|
ATO |
James O'Halloran, CEG Services |
|
ATO |
Julia Donohue, Commonwealth Business Registry Service |
|
ATO |
Kathrina Weinhonig (Secretariat Support), Enterprise Strategy and Design |
|
ATO |
Larissa Jones-Angel, ATO Corporate |
|
ATO |
Michael Karavas, CEG Services |
|
ATO |
Michael Taylor, Small Business |
|
ATO |
Michelle Allen, Enterprise Solutions and Technology |
|
ATO |
Michelle Crosby, Commonwealth Business Registry Service |
|
ATO |
Sally Bektas, ATO Corporate |
|
ATO |
Tracy Littlewood, CEG Services |
|
Australian Chamber of Commerce and Industry |
Ross Lambie |
|
Australian Lottery & Newsagents Association |
Michael Renshaw |
|
Australian Retailers Association |
Jessica Yu |
|
Australian Small Business and Family Enterprise Ombudsman |
Kate Carnell (Co-chair) |
|
Australian Small Business and Family Enterprise Ombudsman |
Bruce Billson |
|
Australian Veterinary Association |
Moss Siddle |
|
Business Enterprise Centres Australia |
Graham Baxter |
|
Chartered Accountants Australia and New Zealand |
Susan Franks |
|
Council of Small Business Organisations Australia |
Castaly Haddon |
|
Council of Small Business Organisations Australia |
Peter Strong |
|
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 Traders Association of Australia |
Richard Dudley |
|
Real Estate Institute of Australia |
Jock Kreitals |
|
Restaurant and Catering Industry Association |
Thomas Green |
|
Small business operator |
Tony Sama |
|
Treasury |
Bede Fraser |
|
Apologies
Organisation |
Members |
|---|---|
ATO |
Dana Fleming, Superannuation and Employer Obligations |
Small business operator |
Deborah Cook |
Small business operator |
Maree Petersen |