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  • Small Business Stewardship Group key messages 28 August 2019

    Welcome and introduction

    Members were welcomed and apologies noted. No conflicts were declared.

    Changes in ATO representation:

    • Robert Ravanello, Deputy Commissioner for Debt and Lodgment, has retired
    • Andrew Watson is the new Assistant Commissioner, Small Business with a focus on integrating the Small Business view across the ATO.

    New members:

    • Greg Ellis - Indigenous Business Australia
    • Thomas Green - Restaurant and Catering Industry Association.

    The co-chairs noted a member’s request for information about the role of the Small Business Commissioners in dispute resolution. The Secretariat is working with Australian Small Business and Family Enterprise Ombudsman to prepare information about dispute resolution assistance for small business.

    Small Business Stewardship Group (SBSG) minutes are now referred to as ‘Key Messages’ and are published as such on the ATO website.

    Questions on agency updates

    Agency representatives provided written updates which were included in the meeting papers circulated to members. At the meeting the following issues were discussed.

    Australian Small Business and Family Enterprise Ombudsman (ASBFEO)

    Small businesses sometimes face challenges deciding if a worker should be treated as an employee or a contractor because it is not always clear cut. Business models often allow for engaging contractors for services rather than employees. Clarification of this issue is high on small business agendas, particularly for those who try to do the right thing but make a genuine mistake.

    ASBFEO participated in a Roundtable focussing on contractor versus employee definitions with attendees from the Fair Work Ombudsman and the ATO. Due to different regulatory regimes, the perspectives can be divergent. The Roundtable agencies are developing a consistent message on the difference between an employee and a contractor that directs enquiries to the best website. The ATO is also reviewing its online employee/contractor decision tool, which helps a business owner to determine if a worker is a contractor or an employee for tax and superannuation purposes.

    Treasury

    In July 2019, the superannuation guarantee and salary sacrifice integrity measure was reintroduced to the Parliament. The measure makes it clear that salary sacrificing does not reduce employers’ superannuation guarantee obligations as was always intended. The date of effect will be from 1 July 2020.

    Members also discussed the Government proposal to introduce an economy-wide cash payment limit of $10,000 for payments made or accepted by businesses for goods and services. The Black Economy Taskforce recommended this action to tackle tax evasion and other criminal activities. The Government released for public consultation, exposure draft legislation and accompanying explanatory material to implement the economy-wide cash payment limit from 1 January 2020. Members raised concerns such as:

    • some customers prefer to use cash that they have saved
    • some do not have a credit card with a limit over $10,000, and
    • some EFTPOS equipment can be unreliable.

    Treasury will consider this feedback as part of its current consultation process.

    Department of Employment, Skills, Small and Family Business

    The Franchising Taskforce is currently consulting on an Issues PaperExternal Link, which is intended to generate feedback and is framed around the recommendations in the Fairness in Franchising Report of the Parliamentary Joint Committee on Corporations and Financial ServicesExternal Link. The Taskforce is keen to get as many views as possible and encourages small businesses to participateExternal Link in the consultation process.

    Australian Taxation Office

    On 27 August 2019, the ATO released the income tax performance of small businesses including our estimate of the 2015–16 small business income tax gap. The findings show that almost 90% of income tax from small businesses is reported and paid voluntarily, with little or no intervention from the ATO. The estimated small business income tax gap for 2015–16 is 12.5%, or $11.1 billion. Of this, over $7 billion (or 64% of the total gap) is attributable to black economy behaviour. The ATO is implementing a number of strategies to improve compliance, combat black economy behaviour, reduce the tax gap and level the playing field for small businesses.

    Since 1 July 2018, the ATO has been running a pilot of Independent Review for small business. Independent reviews were offered to small businesses prior to finalising their audits and undertaken by officers from outside the Small Business line. The initial twelve month pilot has concluded and the ATO is considering the future of the pilot based on data gathered over the past year. The service is continuing until the evaluation is complete. Members will be briefed on the outcomes of the evaluation at a future meeting.

    Member discussion

    Access to finance is an ongoing concern for small business. The members discussed current impediments including possible impacts of ATO debt payment arrangements. Chartered Accountants Australia and New Zealand and ASBFEO are working together to provide small businesses with information about succession planning and getting ready to sell a business. In August, ASBFEO and Scottish Pacific Business Finance released a guide FitsME – Essential guide to business fundingExternal Link, outlining available funding for small businesses and providing advice on becoming ‘finance fit’ to increase the chance of successfully accessing finance.

    Members raised concerns about sharp increases in insurance premiums and excess payments in the light of recent property warranty issues in NSW. Members reported that some excesses have quadrupled and that small businesses may need to access finance to cover these costs, even before culpability is determined. For a small business, this cost can be disproportionately large, impacting on operating costs and ultimately, business viability. ASBFEO will examine this issue further.

    Members discussed the legitimacy of credit card surcharges. Surcharges are legal but a business can only surcharge what it actually costs them to process card payments, including bank fees and terminal costs. Complaints about excessive surchargesExternal Link should be made to the Australian Competition and Consumer Commission (ACCC). Further information for businesses is available on the ACCC websiteExternal Link.

    Payment times

    The issue of unreasonable payment time behaviour by large business continues to be an issue for small business with some companies continuing to set payment terms of 60 days or more for small business invoices. Members discussed the impacts of this behaviour including cash flow problems, the effect on business viability and the flow-on community impact in regional areas.

    Some large businesses are charging small business contractors for the privilege of shorter payment times. While not ideal, this is at least an indication that some small businesses are getting paid sooner.

    Invoice factoring and invoice financing (or discounting) were raised as less than ideal but viable options for small business to speed up payment times, funding cash flow and growth. With factoring, a lender buys the debt for around 80% of the value and collects invoice payments from the client/debtor. With invoice financing, the small business borrows from a lender against their outstanding invoices in the form of a loan or line of credit. Once the client pays the invoice, the small business repays the lender plus fees and interest.

    It was noted that while e-Invoicing can improve payment times, it has limitations as it may not be available to everyone on the supply chain, leading to inconsistencies between times of payments.

    Using Business Registry data to unlock economic and social value

    The ATO is the custodian of the Australian Business Register (ABR) and is working on proposals for Government approval combining the ABR with registries currently managed by the Australian Securities and Investments Commission (ASIC). A new, modernised business registry system will transform the way business interacts with government by significantly improving business identity and the accuracy and currency of data.

    The Government announced the following two changes in Budget 2019–2020 to strengthen the Australian Business Number (ABN) system:

    1. From 1 July 2021, compliance with income tax return obligations will be a condition of maintaining an ABN.
    2. From 1 July 2022, ABN holders will be required to annually check pre-populated ABR data to ensure accuracy and confirm that an ABN is still required.

    Treasury and the ATO will shortly be consulting further with the community on the Strengthening the ABN System initiative.

    A critical issue for the register is maintaining current and accurate data, which includes removing inactive ABNs where people have forgotten to cancel them themselves. The discussion focused on ways we can connect business to services and unlock data for economic and social value. The members discussed the following ideas:

    • cutting red tape and the cost of compliance by keeping processes simple
    • prioritising the currency of business addresses and Australia and New Zealand Standard Industrial Classification (ANZSIC) codes
    • identifying business size - albeit some members disagreed
    • identifying ways to improve payment times behaviour
    • confusion around removing trading names and the difference with registered business names
    • pros and cons of the register being able to support decision making with information about solvency status
    • indicating a good behaviour record such as meeting employee payment obligations including superannuation
    • identifying directors at risk of phoenix or bankrupt activity - it was noted that not all bankruptcies are purposeful evasion behaviours but visibility of previous directorships will assist to form a view.

    The ATO thanked the members for their thoughts and ideas which will feed into the Registrar’s consideration of further opportunities for the register to unlock social and economic value.

    Single Touch Payroll (STP) and superannuation update

    While compliance with STP obligations is better than we anticipated for this time, we still need to help smaller employers to make the transition. At 12 August 2019, 95% (around 69,500) of substantial employers and 41% (around 307,000) of small employers (19 or less employees) were reporting through STP.

    The ATO continues to run an extensive communication and education campaign around this change for the 720,000 affected small employers. Members discussed STP help and assist materials for small employers. Following previous feedback from SBSG members, the ATO has made the 30 September extension date for small employers, more prominent in our communication materials. At the meeting, members provided additional feedback on the ATO’s STP communication for small business including help and assist materials. The ATO has also:

    • recently published a range of resources to support small employers and their tax professionals including the guide, Single Touch Payroll – an introduction for small employersExternal Link
    • run an STP webinar for the Institute of Certified Bookkeepers
    • provided STP transition support to industries such as accommodation, food services, postal and warehousing, which are lagging behind
    • written directly to all employers who haven’t yet engaged with STP and also to all registered agents with a list of their clients who have not moved to STP.

    Impact of Single Touch Payroll on superannuation guarantee

    An advantage of STP is the visibility of superannuation guarantee (SG) payment data, leading to fewer cases requiring an audit. STP obligations have the effect of reminding employers of their SG obligations at the end of the pay period, rather than at the end of the year. STP data thus far shows that 95% of SG is paid correctly. Before STP, the ATO had no visibility of the SG system unless an employee made a complaint or we received data from superannuation funds many months after SG was due. Now the ATO can compare an employer’s declaration of the amount of SG paid with what was actually paid into the fund in real time.

    The ATO can nudge or notify employers who haven’t paid SG. In a pilot sample of 85 employers contacted regarding late SG payments for their employees, 30% responded by paying the outstanding SG. The ATO intends to expand this approach but its ongoing focus will continue to be identifying employer intentions to pay SG and patterns of behaviour.

    Other business

    Members were encouraged to submit ideas, issues and topics for discussion at future meetings.

    As part of our ongoing effort to deepen our understanding of the current small business client experience and share that knowledge with our staff, the ATO is looking at ways to better share and link discussions held at the SBSG and the ATO’s internal Small Business Experience Forum. SBSG member Richard Dudley, CEO of the Motor Trades Association of Australia, presented to the June Small Business Experience Forum on emerging issues in the motor trades industry, irritants with the ATO and suggestions for ATO assistance. Forum members appreciated the opportunity to hear first-hand from Richard. We will look for opportunities to provide forum members with further direct insights from small businesses and their representatives. SBSG members were encouraged to express interest in presenting at future forum meetings.

    The SBSG membership is refreshed every two years. Expressions of interest for 2020–2021 membership will commence shortly as the current SBSG membership was put in place in 2018.

    Meeting close

    Co-chair Deborah Jenkins thanked members for their contribution to the meeting. The next meeting is scheduled for 29 November 2019 in Canberra.

    Attendees

    Attendees are listed below.

    Organisation

    Members

    ATO

    Deborah Jenkins (Co-chair), Small Business

    Australian Small Business and Family Enterprise Ombudsman

    Kate Carnell (Co-chair)

    ATO

    Andrew Watson, Small Business

    ATO

    Emma Rosenzweig, Commonwealth Business Registry Service

    ATO

    James O’Halloran, Superannuation and Employer Obligations

    ATO

    Jason Lucchese, Superannuation and Employer Obligations

    ATO

    Michelle Crosby, Service Delivery

    Treasury

    Tina Smith

    Australian Chamber of Commerce and Industry

    Jenny Lambert

    Australian Retailers Association

    Yale Stephens

    Australian Veterinary Association

    Moss Siddle

    Business Enterprise Centres Australia

    Graham Baxter

    Chartered Accountants Australia and New Zealand

    Susan Franks

    Department of Employment, Skills, Small and Family Business

    Peter Cully

    Direct Sellers Association of Australia Inc

    Gillian Stapleton

    Institute of Certified Bookkeepers

    Matthew Addison

    Real Estate Institute of Australia

    Jock Kreitals

    Small business operator

    Deborah Cook

    Small business operator

    Maree Petersen

    Small business operator

    Michelle Size

    Small business operator

    Tony Sama

    Apologies

    Apologies are listed below.

    Organisation

    Members

    Australian Lottery and Newsagents Association

    Michael Renshaw

    Australian Veterinary Association

    Anne McCotter

    Council of Small Business Organisations Australia

    Peter Strong

    Employer Obligations Association

    Paul Mather

    Indigenous Business Australia

    Greg Ellis

    Motor Traders Association of Australia

    Richard Dudley

    Treasury

    Bede Fraser

      Last modified: 04 Oct 2019QC 60244