Small Business Debt
The ATO is working with Financial Counsellors Australia and other partners to identify opportunities to improve how we assist clients who are experiencing vulnerability and financial stress. Through this work we have identified areas for immediate focus including proof of record ownership (PORO), three-way calls, payment plans and review of ATO correspondence.
Disclosure of Business Tax Debt is a firmer action engagement for high value debt (clients that have debts over $100,000 that are more than 90 days old). Improvements to systems now mean that businesses will automatically receive an Intent to Disclose notice when they meet the criteria for disclosure. The intent notice provides the business with 28 days to act, after which their tax debt may be disclosed. Of the businesses that we wrote to in 2022 with eligibility for disclosure, 1 in 3 effectively engaged with us, either making full payment, part payment or entering a payment arrangement.
The law requires that where a tax refund is available, offsetting against a debt on hold must occur. Client experience, particularly for the vulnerable remains a key priority. Correspondence with affected clients will occur prior to tax time for awareness and those impacted are encouraged to engage with the ATO to discuss potential options.
Member discussion
Communication of payment details (BPAY information) may contribute to the quantity of small debt and there are simple issues that could be investigated.
Members questioned the interaction between payment plans, disclosure of business tax debt clients and offsetting against debts on hold. The ATO confirmed:
- Businesses that enter into a payment plan in response to an intent to disclose notice, however default on that plan and do not engage with us, will become eligible for disclosure again.
- Entering into a payment plan cannot pause offsetting, as offsetting is required by law.
- Payment plan terms and conditions highlights credits will be offset against their debt. Clients are still expected to make the full payments they have agreed to until the debt is paid in full.
- Even though we do not commence action to collect a debt that’s on hold, businesses are provided with an option to pay all or part of the debt at any time.
Expanding the use of Single Touch Payroll data
From July 2023 the ATO will make pay as you go withholding (PAYGW) amounts reported through Single Touch Payroll (STP), available as pre-fill in activity statement in ATO Online.
A new Activity Statement Lodgment Reminder Strategy will also be piloted, initially to 3,000 employers. The strategy will involve a reminder being sent to an employer who has reported withholding in STP in the period of the activity statement and have not lodged their activity statements within 7 days of due date. Intermediaries will also be provided with an On-Demand Activity Statement Lodgment Report to provide visibility of who has been reminded.
The changes have been designed to give effect to policy intent to allow businesses to ‘tell us once’.
Consultation was held with tax professionals and digital software providers throughout the design. Employer and intermediary guidance and communication will be subject to further consultation.
Pre-fill has been piloted with 2,700 employers from 2020. These employers will continue to have access to pre-fill information.
Key messages for employers are:
- the prefill amount will update each time an employer submits an STP report for the period
- employers should compare ATO PAYGW prefill to their records and correct if it doesn’t match
- employers can view the STP report list to see what makes up the prefill.
Member discussion
Members questioned if compliance activity will be undertaken on employers that correct prefill information. The ATO confirmed that correcting prefilled amounts will not trigger a specific compliance activity, employers should correct amounts if they don’t match their records. However, we may contact employers to seek an understanding of discrepancies that may arise over time as part of our BAU approach to managing the PAYGW risk. Compliance actions occur for employers that continue to inadvertently or intentionally declare incorrect PAYGW amounts.
Member feedback on the benefits of the change varied. One member noted that reconciling reporting amounts and responding to engagement about discrepancies could create more workload. Other members agreed that the benefits are great, and it will make reporting easier for business.
Client agent linking
Client agent linking is being implemented in response to increasing efforts by criminals to impersonate legitimate users to lodge fraudulent returns or gain access to data that they can make money from.
Client agent linking will require an agent to be authorised by a client when they change agents or engage a new agent via online services. This will enable taxpayer’s greater control on who accesses their data and provide a greater level of security.
There is a need to balance tightening of security to stay ahead of the current environment to protect taxpayer information and having an easy-to-use system.
A pilot has been rolled out to most public and multi-national businesses, the Top 500 private and wealthy groups and government entities. The ATO is working towards including more businesses in the program, including small business. This includes consulting with key stakeholders to understand the best approach to implementation and what is needed to support the agent and business community through the rollout.
Member discussion
Members discussed potential rollout options for small business, specifically segments that could be on-boarded more easily than others. The group noted that active users of online business services as a possible first cohort.
Business not using online services, however, could benefit from the functionality, are another cohort that could be targeted through active promotion of online services offerings.
New to business is another cohort that can be targeted to promote the process and benefits of online services.
Discussion was held about the group of taxpayers that don’t have agents at all. This group could be locked into the solution upfront, to reduce the risk of unauthorised client agent linking.
Members noted opportunity to include detail on what the agent is authorised to manage on behalf of the client as part of the nomination process, noting this dialogue has likely just occurred between the client and agent.
It was noted that many may assume there are already safeguards in place around client agent linking authorisation. Communication and education of the risk and importance of the process should not be a challenge.
The agent linking project was supported by members as being beneficial to reduce the risk with request for BAU implementation to occur as soon as possible.
The ATO agreed to share the six step process clients need to undertake before authorizing an agent out of session, for member feedback.
Improve Small Business Tax Performance
On 4 April 2023, Second Commissioner Jeremy Hirschhorn gave the Commissioner’s Address at the 15th International ATAX conference. The speech highlighted the opportunity to build a digital first ecosystem to help small businesses comply with their tax and super obligations by integrating the tax system within natural business system.
The ATO is exploring practical ways to improve small business tax performance, focusing on ‘right time’ payment and reporting.
Consultation with the BAS and Tax Agents has provided insights on attributes in the profession that add value to small business tax performance, including:
- encouraging clients to provision for tax bills or pay tax ahead of BAS lodgment.
- supporting clients to adopt and effectively use digital systems.
- providing upfront education.
The ATO is progressing several activities to explore improvements to small business tax performance:
- A GST ‘right time’ pilot to explore the use of new digital solutions to streamline and simplify GST payments to the ATO.
- Working with Digital Service Providers (DSP’s) to explore how practical compliance guidance can be used to provide certainty of their position in software.
- Engaging with Australian Retailers Association on a pilot for retail small businesses to opt into monthly GST reporting.
- Working with Commonwealth Bank and Intuit on their pilot of automating GST using a central bank digital currency (CBDC) in Australia.
Member Comments
Members encouraged the ATO to consider building ‘affirmations’ or ‘assurances’ into the system to let businesses know they are on track.
A contributing factor for business tax performance is red tape and complexity around the different due dates for compliance. Simplification of reporting requirements including lodgment program, frequency of forms and registrations needs to be top priority.
Members highlighted that data quality and assurance is an important consideration.
Agency updates and member discussion
Member discussion
Ongoing economic pressures are having an impact on consumer buying in the retail industry. Direct Selling members are reducing discretionary spending.
Indigenous business lending has also slowed down due to economic pressures.
The COVID pet boom in the veterinary industry is over and combined with an increase in wages for vets and vet nurses, many businesses are feeling the pinch.
Chartered Accountants Australia and New Zealand members continue to report small businesses trying to manage debt from a range of creditors including tax and landlords, as well as dealing with red tape.
Members noted small business are doing it tough across the board, and profit margins are minimal. We need to continue to provide a much support as we can.
Members also noted the many changes across the government are adding to pressures.
Treasury update
Focus has been on preparation for the 2023–24 budget, with several measures, including the small business energy incentive announced early.
The technology and skills boosts are still awaiting law passage. A range of communication activities has been prepared once the legislation received royal assent.
ATO update
ATO systems are in place to support the technology and skills boost once law is received.
The sharing economy reporting regime was introduced on 12 December 2022. Our priority is raising awareness for those electronic distribution platforms and sellers who are in scope for the 1 July 2023 start date (travel service providers and short-term accommodation). Communication activities have commenced, and we will continue to engage with the industry and advisors as implementation progresses.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
Minister for Finance, Senator Katy Gallagher, has requested the Ombudsman conduct an Inquiry to review changes to Commonwealth Procurement Rules and the impact of these changes on small businesses that participate in Commonwealth procurement activities.
The Ombudsman has provided feedback on the Privacy Act Review drawing on wide consultation with the small and family business sector to inform governments response to the report.
The Ombudsman is engaging in the consultation process for workplace relation reforms.
Key areas of disputes include payment, contracts and franchising. We are seeing a hardening of positions following the leniency that occurred during covid.
Enforcement codes are being looked at with an overriding concern around enforcement of codes being inadequate.
Meeting Close
Co-chairs Will Day and Bruce Billson thanked the members for participation in the discussion and advised that the next meeting is scheduled for Wednesday 9 August 2023.
Attendees
Organisation |
Member |
|---|---|
ATO |
Will Day (Co-chair), Small Business |
ATO |
Anthony Marvello, Technical Leadership and Advice |
ATO |
Emma Rosenzweig, Superannuation and Employer Obligations |
ATO |
Emma Tobias, Small Business |
ATO |
Hoa Wood, Individuals and Intermediaries |
ATO |
Jane Mitchell, Australian Business Registry Services |
ASBFEO |
Bruce Billson (Co-chair), Australian Small Business and Family Enterprise Ombudsman |
Australian Chamber of Commerce and Industry |
Natalie Heazlewood |
Australian Veterinary Association |
Moss Siddle |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Council of Small Business Organisations Australia |
Matthew Addison |
Direct Selling Association of Australia Inc |
Adele Sutton |
Indigenous Business Australia |
Niel Barry |
Institute of Certified Bookkeepers |
Matthew Addison |
Real Estate Institute of Australia |
Jock Kreitals |
Small Business Operator |
Tony Sama |
Treasury |
Bede Fraser |
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Adam O’Grady, Individuals and Intermediaries |
ATO |
Andrew Watson, Improve Small Business Claire O’Neill, Lodge and Pay Tax Performance |
ATO |
Jacqui Marchment, Lodge and Pay |
ATO |
Michael Morton, Small Business |
ATO |
Michelle Allen, Superannuation and Employer Obligations |
ATO |
Peta Lonergan, Superannuation and Employer Obligations |
ATO |
Sarah Buchanan, ATO Corporate |
ATO |
Tiffany Waters, Superannuation and Employer Obligations |
ATO |
Ziva White, Individuals and Intermediaries |
Apologies
Organisation |
Member |
|---|---|
ATO |
Karen Foat, Australian Business Registry Services |
Australian Lottery and Newsagents Association |
Michael Renshaw |
Australian Retailers Association |
Jason Robertson |
Indigenous Business Australia |
Greg Ellis |
Small Business Operator |
Deb Cook |
Treasury |
Gino Grassia |