Measuring small business tax performance

By measuring the income tax performance of small business taxpayers in Australia, we see that this population contributes over $89 billion in income tax – this is around 87% of the revenue we expect from them.

We have a program that measures:

• tax performance across all taxpayer populations
• the effectiveness of the tax and superannuation systems.

As part of this, we measure tax gaps (estimates of the difference between the tax collected and the amount that would have been collected if everyone was fully compliant with tax law).

The latest estimate of the net small business income tax gap for 2019–20 is $11.9 billion or 11.6%. This is a preliminary estimate and will be revised in future years using updated data.

We work out our estimate by reviewing the tax returns of a random sample of small business taxpayers – we call this the random enquiry program.

The random enquiry program helps us to:

• understand the taxpayer behaviours contributing to the tax gap
• identify the support businesses need to get their tax right
• devise strategies to increase willing participation in the tax system
• target our resources to combat shadow economy behaviour most effectively.

Recent events have impacted our random enquiry program. This has reduced the size of the sample used in the 2019–20 preliminary estimate. For this reason, the reliability rating of our estimate has also been reduced.