Components that generate the gap
Table 4 summarises the components that generate the small companies percentage net gap. Details on the derivations are outlined further on this page.
|
Element |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
2023–24 |
|---|---|---|---|---|---|---|---|---|---|
|
Population (m) |
0.98 |
1.02 |
1.05 |
1.10 |
1.12 |
1.18 |
1.22 |
1.26 |
1.33 |
|
Theoretical liability ($m) |
15,108 |
15,294 |
16,558 |
16,156 |
16,477 |
21,120 |
23,989 |
25,197 |
29,073 |
|
Voluntarily reported ($m) |
13,170 |
13,660 |
14,780 |
14,661 |
14,836 |
18,167 |
19,872 |
20,523 |
24,112 |
|
Add amendments ($m) |
143 |
118 |
210 |
231 |
203 |
109 |
215 |
215 |
215 |
|
Total reported ($m) |
13,313 |
13,778 |
14,990 |
14,893 |
15,039 |
18,275 |
20,086 |
20,738 |
24,327 |
|
Subtract long-term non-payment ($m) |
209 |
188 |
164 |
152 |
158 |
182 |
399 |
216 |
287 |
|
Expected collections ($m) |
13,105 |
13,590 |
14,826 |
14,741 |
14,881 |
18,093 |
19,687 |
20,522 |
24,040 |
|
Net gap ($m) |
2,003 |
1,704 |
1,732 |
1,415 |
1,596 |
3,027 |
4,302 |
4,675 |
5,033 |
|
Net gap (% of theoretical liability) |
13.3% |
11.1% |
10.5% |
8.8% |
9.7% |
14.3% |
17.9% |
18.6% |
17.3% |
|
Assessment gap ($m) |
1,794 |
1,516 |
1,568 |
1,263 |
1,438 |
2,845 |
3,902 |
4,459 |
4,746 |
|
Assessment gap (% of theoretical liability) |
11.9% |
9.9% |
9.5% |
7.9% |
8.7% |
13.4% |
16.2% |
17.7% |
16.3% |
|
Payment gap ($m) |
209 |
188 |
164 |
152 |
158 |
182 |
399 |
216 |
287 |
|
Payment gap (% of theoretical liability) |
1.4% |
1.2% |
1.0% |
0.9% |
1.0% |
0.9% |
1.7% |
0.9% |
1.0% |
|
Gross gap ($m) |
2,146 |
1,822 |
1,942 |
1,647 |
1,800 |
3,136 |
4,516 |
4,890 |
5,248 |
|
Gross gap (% of theoretical liability) |
14.2% |
11.9% |
11.7% |
10.2% |
10.9% |
14.8% |
18.8% |
19.4% |
18.1% |
Note: Values presented are rounded. Totals are calculated from unrounded values and may therefore differ from the sum of displayed component values.
Figure 5 displays the gross and net gap percentages for small companies detailed in Table 4.
Figure 5: Small companies gross and net tax gap percentages, 2015–16 to 2023–24
Note: The estimates for all years are subject to revision.
Figure 6: Small companies gross gap components, 2023–24
For small companies, overclaimed deductions accounts for about half of the overall gap (50%). Omitted income contributes to 45% of the gap, with the remaining 5% stemming from long-term non-payment.
Non-detection
The small companies element has only 2 elements requiring a non-detection estimate:
- business income
- deductions.
Like individuals in business, the income non-detection uplift for small companies forms a large part of the non-detection estimate.
There are limitations with detecting omitted income in small companies. This is because no, or limited, third-party reporting systems are available to compare to. Uplifts are applied to results based on the midpoint of international ranges.
Deductions non-detection in the small companies population is applied in the same way as individuals in small business. There is also no incentive for these taxpayers to underclaim deductions on their tax return. The deductions non-detection uplift focuses on the potential errors in tax returns where deductions have been claimed.
Table 5 shows the dollar value (in millions) at steps 1 to 6.2 for the small companies element. Steps 6.3 and 6.4 show percentage figures for the gross and net gaps. Further details on the steps used is at Methodology for estimating small business income gap.
|
Step |
Description |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
2023–24 |
|---|---|---|---|---|---|---|---|---|---|---|
|
1.1 |
Estimate unreported amounts for sample and extrapolate to population ($m) |
1,382 |
1,182 |
1,313 |
1,137 |
1,233 |
2,168 |
2,969 |
3,472 |
3,726 |
|
1.2 |
Apply estimate for people outside the system ($m) |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
|
2.1 |
Apply estimate for non-detection (excluding hidden wages) ($m) |
556 |
452 |
465 |
358 |
408 |
785 |
1,149 |
1,202 |
1,235 |
|
2.2 |
Apply estimate for hidden wages ($m) |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
|
3 |
Add long-term non-payment ($m) |
209 |
188 |
164 |
152 |
158 |
182 |
399 |
216 |
287 |
|
4 |
Equals gross gap ($m) |
2,146 |
1,822 |
1,942 |
1,647 |
1,800 |
3,136 |
4,516 |
4,890 |
5,248 |
|
5.1 |
Subtract amendments ($m) |
143 |
118 |
210 |
231 |
203 |
109 |
215 |
215 |
215 |
|
5.2 |
Equals net gap ($m) |
2,003 |
1,704 |
1,732 |
1,415 |
1,596 |
3,027 |
4,302 |
4,675 |
5,033 |
|
6.1 |
Add expected collections ($m) |
13,105 |
13,590 |
14,826 |
14,741 |
14,881 |
18,093 |
19,687 |
20,522 |
24,040 |
|
6.2 |
Equals theoretical tax liability ($m) |
15,108 |
15,294 |
16,558 |
16,156 |
16,477 |
21,120 |
23,989 |
25,197 |
29,073 |
|
6.3 |
Gross gap (%) |
14.2% |
11.9% |
11.7% |
10.2% |
10.9% |
14.8% |
18.8% |
19.4% |
18.1% |
|
6.4 |
Net gap (%) |
13.3% |
11.1% |
10.5% |
8.8% |
9.7% |
14.3% |
17.9% |
18.6% |
17.3% |