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  • Andrew Mills addresses the Tax Institute Tasmania convention

    Andrew Mills 
    Second Commissioner, Law Design and Practice
    Keynote address to the Tax Institute 2019 Tasmania State Convention
    Launceston, 17 October 2019

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    Introduction

    Hi everyone and thank you for having me this afternoon.

    Hearing from Ian Klug, it is heartening to know that, our fellow agencies are working towards the common goal of levelling the playing field for honest and ethical businesses and tax practitioners.

    Today we’re discussing the idea that small business tax is hard – where that perception stems from and what the ATO is doing to help support small businesses manage their competing demands. Small business is and will continue to be an area of focus for the ATO and we have a significant amount of initiatives currently underway that I’ll touch on this afternoon.

    It’s very timely for me to be here in Tasmania and talking about small business, because I’m sure many of you would have seen the news this week about the small business visits the ATO has planned for October and November. We’re visiting 300 businesses on the eastern shore of Hobart, just a few of the 10,000 business visits we have planned Australia-wide across this financial year.

    The visits offer a great opportunity to provide businesses with on-the-ground, practical support. While the black economy is certainly one focus, we also use these events as an opportunity to educate and assist business owners. As part of our Hobart visits we’re presenting a range of community information sessions about important tax topics.

    Because while we are committed to preventing black economy behaviour, we want our focus to be on supporting those businesses trying to do the right thing (who are in the vast majority). Their client experience is what’s most important to us. That’s why we’ve launched a new program of work at the ATO called Better as usual.

    Better as usual

    Better as usual is an ATO-wide initiative in which we’ve committed to continually providing a better level of service. Better as usual recognises that things can go wrong and looks at how we can improve our processes to avoid those cases and minimise their impact. The program has four key streams of work, each focusing on how we can provide a better client experience.

    The first stream is pipeline reviews, looking at the end-to-end client experience to identify where we can create more seamless transitions. We have done a lot of work on initiatives designed to improve the client experience (and that includes intermediaries) and that has tended to be in discrete areas. However, we understand that clients don’t just interact with us once but many times, and it can be frustrating to feel we aren’t dealing with them in a consistent and cohesive way. Our pipeline reviews will address that frustration.

    The second stream is quality improvement. We’re looking at how we can better manage feedback across all areas of the ATO to make better decisions and provide better services. Feedback comes in the form of objections, complaints – directly and indirectly.

    The complex issue and case program is the third stream. Recognising that some cases are just too complex to be dealt with by normal processes, so we’ve created a dedicated team. By allocating the necessary time and resources to address these cases we will ensure every taxpayer gets a fair outcome.

    Finally, our fourth stream is reducing highest client impact action. We’re focusing on how we can better avert those rare but serious cases where a mis-step from inside the ATO can have a significant impact on our clients.

    Between the four streams we are committing to continually improving our level of service. For small business taxpayers, who we know often need that extra level of support, this program will have some tangible benefits.

    Tax performance measures

    However, having said that small businesses need extra support – and we are of course committed to providing that – I don’t want to undersell just how well small businesses are currently performing when it comes to meeting their obligations.

    Recently we released the 2015–16 tax performance measures for the small business market and the results showed that Australian small businesses are doing a great job when it comes to paying their tax. They voluntarily paid $76 billion in income, representing about 87.5% of the tax owed. This is a good result, and comparable to similar jurisdictions around the world.

    The tax performance measures also show that an estimated 60% of the gap (or approximately $7 billion) is due to the black economy, meaning that the vast majority of those trying to do the right thing are keeping up with their obligations.

    Now don’t misunderstand me: when I talk about how well this market is performing, I’m not trying to sell short the difficulty of running a small business. We hear from small businesses every day and we know how hard it can be for them to juggle the many demands on their time and resources. They have ideas for how we could be doing better, and we’re listening.

    Dispute resolution

    One thing I know we have received a lot of feedback on is dispute resolution, especially from small businesses. As the Second Commissioner responsible for Review and Dispute Resolution, this is an issue that is a particular focus for me. We think we do a pretty good job for the most part, but we also realise that it’s not good enough for any business to have a bad experience. I’m pleased to say that we have made some significant improvements to our dispute resolution process over recent years, introducing some important programs aimed at earlier and fair resolution of disputes for small business.

    For example last year we launched the small business independent review pilot, through which we offer small businesses the opportunity to have their audit case independently reviewed before assessment. As of the end of August this year, we have offered the service to over 800 small businesses, 112 of whom have accepted.

    We also have a free Dispute Assist program, specifically designed to support taxpayers going through exceptional circumstances, for example sudden illness or family breakdown. A dedicated Dispute Assist guide is allocated to each business so they get the support they need.

    And of course small businesses always have the right to lodge an objection when they disagree with our decisions, which are dealt with independently by the Review and Dispute Resolution area.

    There are a lot of avenues for small businesses who feel they haven’t been heard and we’re committed to offering them support through those processes.

    Three key attributes of successful small businesses

    But fortunately those businesses represent the minority. As I discussed earlier, we know most small businesses are doing a great job of keeping up with their obligations. At the ATO this is really pleasing – we don’t want to see businesses just scraping by, but thriving.

    With that in mind, today I’d like to talk about three key attributes we see in successful businesses and how we as a regulator help businesses maintain those behaviours.

    Cash flow management

    The first is effective cash flow management. With nine out of 10 small businesses reporting that they had cash flow issues in the last year, it's probably the number one problem businesses cite when they’re in tax trouble and a focus for us at the ATO.

    In addition to the on-the-ground support we provide, including the 2,300 community events we held over 2018–19 for almost 25,000 attendees, we also offer a range of services and resources to help small businesses better manage their affairs. These include:

    • our business performance check tool
    • our Cash Flow Coaching Kit
    • the ability to pre-pay activity statement liabilities
    • preventative SMS payment reminders
    • ATO accounts being available online
    • our automated phone service that allows taxpayers to set up payment plans.

    Digital readiness

    The second key attribute we see in successful small businesses is digital-readiness.

    We know that the more digitally-advanced a small business is, the more likely they are to be on top of their tax obligations.

    Taking advantage of digital advancements allows us to build a tax system that works better for our clients, integrating with technology taxpayers already use to make meeting obligations easier.

    A prime example of this is Single Touch Payroll (STP), perhaps the biggest technological shift the ATO has made in recent years. As you would all be aware, on 1 July this year we extended STP to small employers. STP reduces the administrative burden on businesses by integrating into their payroll software, while allowing us to have assurance that employees are receiving what they’re owed.

    However we acknowledge that, for a range of reasons, some businesses find the transition to digital harder than others. That’s why we’ve offered a range of support measures, from educational resources to a deferred start date to exemptions for those without internet.

    Professional advisers

    The third key indicator for success in small business – and I know I don’t need to persuade any of you of this – is having a professional adviser.

    While the ATO does a lot of work to mitigate the complexity of small business tax we tend to find the single best predictor of success for a small business is whether or not they have a professional advisor.

    We see tax professionals as being vital to the health of the system and the small business market.

    So what we need from you is to continue to work closely with your clients, and proactively engage with them on a regular basis. You are gatekeepers of the system, and by exercising due diligence, asking the right questions and examining their assumptions, you can position your clients for success.

    And on that note, I’m going to finish here because I know the moderator has some questions from you all and I’m keen to hear what you had to say.

    Last modified: 28 Oct 2019QC 60493