Our strategies and approaches
In 2022-23 the year of our latest tax gap estimate, some of our key focus areas to improve small business tax performance included:
- providing continued support to small businesses and their trusted advisors to help them report correctly through public advice, letter campaigns and online learning
- firm compliance action to address a range of shadow economy activities such as omitted income, sales suppression, unexplained wealth, sham contracting, activities targeting high risk industries and behaviours
- strengthening our controls and protecting the system and community against fraud
- addressing growing collectable debt – for those who were unwilling to work with us, we took strong and deliberate action as we increased our debt collection activities
- developing and implementing a digitalised tax experience for small business where tax naturally follows business performance and processes – this work reflects our ambition to reduce compliance costs, improve certainty, and make it easier for small businesses to meet their tax obligations from the start.
Findings from the Small business random enquiry program continue to support the application of differentiated approaches to:
- help small businesses meet their tax and super obligations
- promote fairness across the system, and
- detect and address shadow economy activity.
Helping small businesses to report correctly
Most small business owners want to do the right thing – but navigating tax and super responsibilities while running a business can be challenging.
Through our 'getting it right' campaign, we support small businesses to get their tax and super obligations right by sharing what attracts our attention and the consequences of operating outside the system.
To make managing tax and super easier, we have developed tools and services designed with small businesses in mind.
We want to keep pace with the rapid evolution of technology and the growing use of digital solutions in everyday business operations. As more businesses rely on digital tools to manage their finances, operations and interactions, we are evolving alongside to deliver smarter, more streamlined services.
By harnessing the increasing availability of data, focusing on digital-first interactions and co-designing solutions with the community, we work to:
- create a digitalised tax experience that better aligns with natural business processes and systems
- reduce compliance costs
- help prevent debt
- give small businesses the clarity and confidence to get it right from the start.
Taxpayers avoiding their obligations
We are seeing a concerning increase in the tax gap due to deliberate tax avoidance by some small business taxpayers. This behaviour – known as shadow economy activity – accounts for more than 60% of the gross small business income tax gap.
While most small businesses do the right thing, a minority deliberately do not comply with their obligations. That’s why we maintain a strong and targeted focus on those who deliberately under-report income, overclaim expenses or operate outside the system.
To strengthen this effort, the government extended the ATO Shadow Economy Compliance Program through to 30 June 2028, ensuring continued action against those undermining the integrity of our tax system.