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ATO action to reduce the gap

How we support our clients to meet their compliance obligations.

Last updated 21 November 2023

The key to an effective tax system is a high level of willing participation. This depends on how much the community values the system and has trust and confidence in us as administrators.

Individuals not in business are the largest community segment interacting with the tax and super system. Find out how they contribute to our economy by paying tax voluntarily. We discuss the challenges they face and how we are improving the system for people who want to do the right thing, while taking firm action with those who don't.

While most tax is paid voluntarily through the pay as you go (PAYG) withholding system, we are concerned with how many taxpayers over-claim deductions. We commonly see errors with:

  • work-related expenses
  • rental properties
  • omission of income, particularly where wages are paid in cash.

A range of factors contribute to why some people misreport this information.

Based on the principle of willing participation, our strategies to reduce the gap include:

  • improving and tailoring our public advice and guidance material, tools and services including advice on emerging risks like the sharing economy and cryptocurrencies
  • increasing the quantity and quality of the data we collect
  • adopting new ways of using data and technology to make lodging tax returns and substantiating deductions simpler, including streamlining reporting processes and pre-filling more information
  • helping taxpayers and their tax agents report correctly, using 'nudge' messages and other correspondence to alert them where we see something unusual
  • better understanding the circumstances of debt, doing what we can to prevent it and offering practical repayment options
  • taking firmer action to address non-compliance among higher-risk taxpayers and tax agents, including additional audits in areas driving the tax gap
  • pursuing penalties or prosecution or referring tax agents to the Tax Practitioners Board in the most serious of cases.

We also provide insights about opportunities for statutory law reform to improve the tax and super system to government through the Treasury. We do this where we see the law is difficult for both taxpayers and us to apply and it may increase compliance costs. We also suggest where the law can be strengthened to allow us to deal with compliance risks more effectively.

We seek to administer the tax and super system fairly and consistently. We design our interactions with taxpayers and tax agents to be professional, contemporary and tailored to individual circumstances, making it easy to comply and hard not to.

While we focus on preventing non-compliance to reduce the gap, we will take action to protect the integrity of the system and ensure everyone – from individual taxpayers to the largest corporate groups – pays the right amount of tax.