Kirsten Fish, Second Commissioner, Law Design and Practice
Speech delivered to the Institute of Public Accountants National Congress 2025
20 November 2025
(Check against delivery)
Shaping the Future of Small Business Tax: Partnership, Progress, and Possibility
Good morning and thank you all for having me here today.
Before I begin, I would like to acknowledge the traditional owners and custodians of the Whitsundays, the Ngaro and the Gia people. I pay my respects to their Elders past and present, and recognise their ongoing connection to land, sea, and community. I extend that respect to all Aboriginal and Torres Strait Islander peoples joining us today. It is a privilege to gather on this land.
It’s a privilege to speak with so many dedicated professionals who work at the heart of Australia’s tax system and who help shape its future every day.
Today, I want to talk openly about where our tax system stands, the unique challenges facing the small business sector, and the exciting opportunities ahead of us.
I also want to take a moment to recognise the important role you play as trusted partners to small businesses, as complexity brokers in a challenging system, and as stewards in a shared mission with the ATO.
You are the critical link between policy, administration, and the lived reality of small business owners. Thank you for all you do for your clients and for your communities.
Australian Tax System: Strong Performance and High Compliance
Let’s begin with a truth we should all be proud of: Australia’s tax system performs exceptionally well.
Australia is one of only eight countries that publishes comprehensive tax gap estimates every year. The tax gap estimates the difference between what we expect to collect, and the amount that would have been collected if every taxpayer was fully compliant with the law.
We recently published our gap estimates for the 2022–23 year. That data shows that, in aggregate, we expect to collect 93% of the theoretical tax payable. When you look at large corporate taxpayers, you’ll see we expect to collect around 94% of income tax as a result of voluntary compliance at lodgment, rising to over 96% after our compliance activity. And in the individuals (not in business) segment we see expected collections of 93% at lodgment, rising to almost 94% after interventions.
This means the vast majority of Australians, from individuals to large corporates, are doing the right thing.
Overall, our system is robust and working well. But there is always more work to do.
Small Business Sector
The small business sector is large and diverse. Approximately 4.9 million small business entities employ nearly 7.3 million people and generate more than $900 billion in business income each year.
When it comes to tax, we know most small businesses try to do the right thing. The majority of small businesses lodge on time and pay on time.
Even so, the small business income tax gap continues to be the largest component of the total gap. 47% of the $58.2 billion total tax gap is attributable to the small business income tax shortfall. And it is growing – over 2 years the small business income tax gap increased from 15% to 17.4%, to a total of $27.2 billion. The net GST gap is estimated to be $8.1 billion, or 9.1% of expected GST collections, and we know that small businesses are also responsible for more than half of this amount.
Small business payment performance also lags behind other sectors. Just under 70% of small business tax obligations paid on time, compared to nearly 90% across the broader taxpayer population. Small businesses owe approximately $35.9 billion in collectable debt, that’s about 66% of the ATO’s total collectable debt book. Approximately $26.6billion, or 70%, of this small business debt is self-reported activity statement debt and superannuation guarantee surcharge.
Understanding and responding to the Challenges
Drivers of the Small Business Tax Gap
When we look at what drives the small business income tax gap:
- 67% of it is due to omitted income
- 25% to overclaimed deductions
- 7% is attributable to businesses operating outside of the system - running cash-only operations, failing to register, or ignoring their tax obligations.
Operating outside of the system
This deliberate behaviour to operate outside the system is a concerning trend, and something we are particularly focused on.
In particular, the ATO is looking at:
- ride-sourcing drivers, using data matching to ensure compliance with GST registration requirements
- contractors to match income through the Taxable Payments Reporting System
- businesses in the property and construction industry with recurring compliance issues like omitting sales income, overclaiming expenses, incorrect claims for the R&D tax incentive and failing to register for GST.
The ATO is taking firm action where we see deliberate choices that create an uneven playing field for those doing the right thing. When businesses don’t meet their tax and employer obligations, it impacts everyone.
‘Getting It Right’ Campaign and Focus Areas
Most small business do try to do the right thing. Many of the mistakes they make stem from misunderstanding the rules, insufficient advice, or inaccurate record keeping.
The ATO’s getting it right campaign is a targeted initiative to help small businesses meet their tax obligations from the outset. It is based on what we observe and the data we gather through our programs. Each quarter we publish our focus areas on ato.gov.au, paying special attention to industries where mistakes and non-compliance are common.
The ATO’s current focus areas include:
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Using business money and assets for personal benefit
Division 7A remains a key area where errors frequently occur, especially when private companies provide money or benefits to shareholders or associates in a tax-free manner. Common mistakes include failing to recognise the company as a separate legal entity, poor record-keeping, and not meeting Division 7A requirements for loans. - Deductions and concessions
Non-commercial business losses
We are also seeing individuals incorrectly claiming and offsetting losses from non-commercial business activities against other income sources, rather than deferring them to a later income year and treated as a deduction when the business activity continues. Common errors include offsetting losses from hobby activities, misunderstanding the income requirement (especially when taxable income exceeds $250,000), and failing to pass the eligibility tests for offsetting.
Small business capital gains tax concessions
For small business operators, CGT concessions can significantly reduce the amount of CGT payable, provided the business is genuinely eligible. The ATO’s focus is on ensuring that businesses accessing these concessions meet the eligibility conditions and report the correct amounts. Common errors include misunderstanding the requirements around business activity, turnover thresholds, asset ownership, and age, as well as incorrect reporting or misapplication of concession codes. Mistakes also arise from using the wrong dates for asset transactions, applying discounts incorrectly, or inappropriately using CGT rollover relief.
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Building good business habits
Finally, the ATO is encouraging the development of good business habits, such as accurate and timely reporting. Since April, around 2,000 small businesses with poor compliance histories are being moved from quarterly to monthly GST reporting to help embed better practices and improve alignment with reconciliation processes.
Our goal is to support small businesses to meet their obligations confidently through guidance, support and nudging toward better practices. We encourage both small business and the tax profession stay informed through our Small business newsroom, Tax professionals newsroom and our ATO webinarsExternal Link and Open forums.
Four Principles of the ATO Payment Strategy
Our corporate plan highlights our continued focus on strengthening payment performance and debt collection. Our role is to collect tax so that the government can deliver services to the Australian community and it is our job to ensure everyone pays the right amount, to the benefit of all Australians.
Effective debt management is crucial for system integrity and fairness. The ATO’s payment strategy is built on four key principles:
- Firm, Consistent, and Clear: Those who can pay, must pay on time.
- Support for those who are struggling: If you have capacity but are struggling, we’ll help you get back on track.
- Firmer Actions for Non-Engagement: Businesses that don’t engage or deliberately avoid payment face more decisive actions – director penalty notices (DPNs), garnishees, and possible disclosure to credit reporting bureaus.
- Support for Those Without Capacity: For those unable to pay, we help them exit the system with dignity.
Our preference is always to support taxpayers to pay. The ATO uses early intervention activities, SMS reminders, outbound letters, and tailored guidance, to promote self-correction and engagement. Payment plans are available to those who genuinely need support and have the capacity to catch up – we have more than 638,000 active payment plans in place, and over two thirds are with small businesses.
For financially distressed but commercially viable small businesses, Small Business Restructuring (SBR) offers a formal pathway to restructure debts and continue operating. The ATO is committed to supporting viable businesses, and supports SBR plans that are fair, commercially sound, and prioritise employee entitlements. Last financial year, the ATO voted on 2,688 restructuring plans, supporting around 80%.
Tailored Support for Vulnerable Taxpayers
Also relevant in this respect is the ATO’s recently released Vulnerability Framework. This framework recognises that those facing illness, hardship, or other vulnerabilities, including in operating a small business, require tailored assistance. As part of bringing the framework to life, we’ve already implemented tailored training and guidance for our frontline operations staff, to identify and respond to indicators of vulnerability during conversations and account reviews. While we can’t change tax or super outcomes under the law, we are committed to listening, communicating clearly and connecting people with the right support.
Taxpayer relief – General interest charge (GIC) and Failure to lodge penalty remission
Taxpayers are required to meet their lodgment and payment obligations on time. Interest and penalties are applied to compensate the government and the community for late payments of tax.
We receive hundreds of thousands of requests for relief from penalties and interest every year. In the last financial year, the ATO received over 125,000 requests to remit GIC. Of those, over 95,000 or 76% were granted. The ATO remitted $2.6 billion of GIC for that period and a further $1 billion in shortfall interest charge (SIC).
You may be aware that we are currently undertaking a comprehensive review of our approach to taxpayer relief provisions. This review began in March and aims to ensure that the relief framework is sustainable and supports those genuinely in need. The review is focused on balancing fairness, supporting taxpayers impacted by circumstances outside their control, but also limiting unfair advantage for those who could meet their obligations through commercial means.
The principles guiding penalty and interest concessions in the future will focus on fairness, conditionality, context, engagement, and transparency. When released, our refreshed approach will be clear, and our guidance products transparent, so that taxpayers know what is available to them, and what they need to demonstrate access this support.
In addition to the review, we’ve also heard the feedback from the tax practitioner community about our processes:
- timeliness of decisions on remission requests
- insufficient explanation/reasons for decisions not to remit
- inconsistency in decision making.
Rest assured, we’ve heard you. In response, we have a number of key changes launching in January next year. These will include improving online guidance, introducing standardised application forms, limiting phone approvals to $2,500, transitioning agent remission requests to Online Services for Agents, and establishing a specialised workforce to manage remission applications. We believe these process improvements will address many of the concerns raised with us and position us well to implement the outcomes of the comprehensive review once it is finalised.
I am sure you will welcome the news that we are undertaking this review to ensure there is transparency in how we make our decisions, and that fairness and consistency can be maintained in how we deal with the requests.
The Future: Digital Transformation and Simplification
Making complying easy
On the flipside, the businesses that are 'getting it right' have a number of things in common. They:
- use business software
- keep good records that help them manage their business well
- get advice from trusted sources, their tax professional or the ATO website
- set aside funds from cash flow to be available when it’s time to lodge and pay.
Building a Digital Future
At the ATO we want to embed these great practices across the small business population and build on them to continue to support improved tax performance.
Looking to the future, we are focused on creating digitalised tax experience to help small businesses get their tax obligations right from the start, reduce compliance costs, improve certainty, and make it easier to meet tax obligations.
The ATO’s aspiration is to streamline the business tax experience, delivering the simplification benefits akin to those achieved for individual taxpayers over the past two decades, and designed to ensure systemic safeguards are in place to promote and ensure a level playing field.
We are looking to a future where:
- Digital tools and automation will reduce the burden of compliance tasks and streamline tax processes.
- Reporting and payment will be more frequent, aligned to natural business systems and processes.
- Small businesses will have greater certainty and access to real-time data, enabling better decision-making and cash flow management.
The ATO’s recent Letter to the Treasurer and Finance MinisterExternal Link outlines our commitment to simplify tax and regulatory processes, and support productivity and economic growth for small businesses. The initiatives committed to include:
- Encouraging the move from quarterly to monthly BAS lodgment – our pilots of this initiative show that more frequent reporting supports better cash flow and aligns with natural business rhythms.
- Embedding pay as you go (PAYG) instalment calculations directly into accounting software, reducing the complexity of varying instalments and facilitating payment of instalment amounts that reflect business performance.
- Expanding pre-fill and third-party data use to support small businesses in completing returns, reducing manual errors and improving accuracy.
Our goal is to reduce the burden of compliance, help businesses stay on top of obligations and be more productive.
Payday Super
The introduction of Payday Super is a big step toward aligning payments of tax and super obligations with natural business systems and rhythms. From 1 July, employers will be required to pay their super guarantee obligations at the same time as salary and wages.
There are practical steps employers can take now to get ahead of the changes and put themself in the best position to be ready for 1 July.
- Start making super payments more frequently. Employers may currently pay their employees their super every quarter, but they can switch now to make these payments weekly, fortnightly or monthly.
- Check their employees’ super funds details are up to date.
- Review governance and assurance processes around super reporting.
- For those currently using the ATO’s Small Business Super Clearing House, start looking for alternatives.
- Finally, look at cash flow to understand how moving to paying super more frequently will affect the business.
We know the challenges that small business face, and that they will need your assistance.
We are working closely with tax professionals, digital service providers and super funds to help prepare small business employers and their advisers for the 1 July start date.
We have released a Draft Practical Compliance Guideline PCG 2025/D5 Payday Super – first year ATO compliance approach, in relation to our compliance approach for the 2026–27 year, and are actively considering the feedback we received.
You will see and hear more from the ATO over the coming months, and as the 1 July 2026 start date isn’t that far away. I encourage you to visit Payday Super for all the latest information.
Collaboration with Tax Professionals
Australia is reliant on tax to fund government services and the efficient running of the tax system is reliant on the existence and valuable role of tax professionals. We, as a country, need tax professionals that are trusted and trustworthy. That understand the role tax plays in society, the performance of the country’s tax system, and the integral part they themselves play in it. That understand, and take care with, the influence they have over their clients’ attitudes to tax.
Australia’s tax system is complex. ATO insights show that small businesses who engage regularly with tax professionals are far more likely to report correctly and avoid debt. Trusted advice is one of the 3 common elements among successful small businesses.
Tax accountants and advisors are the primary complexity brokers, translating intricate, ever-changing rules into actionable guidance for clients. You do more than prepare paperwork; you add value by interpreting data, assessing risk, and supporting compliance. Top tax advisers do not look at the technical issues in isolation. They consider matters holistically, in the commercial context, with an understanding of the consequences of the position adopted for the business, the tax system, and the likely attitudes of the administrator. As the system evolves, your role becomes even more important for those with complex affairs who need extra support.
As the tax system becomes more digital and integrated, new opportunities arise for tax professionals – advancements in technology and AI are already delivering digital resources to small business and their advisors.
As these continue to evolve, tax professionals will have access to more real-time data and integrated digital resources:
- this will reduce both manual errors and administrative compliance burden
- allowing greater ability them to shift toward strategic advisory roles, focus on complex issues, planning, and business growth and ultimately deliver greater value to clients.
Small businesses drive innovation, create jobs, and underpin our communities. Helping them succeed is a mission we all share – by supporting compliance, reducing complexity, and fostering good business habits. The ATO provides the tools, guidance, and digital solutions; you provide the expertise, advice, and human connection.
Shared Stewardship and Partnership: The Path Forward
Our vision is an Australian tax system where every taxpayer meets their obligations because complying is easy, help is tailored, and deliberate non-compliance has consequences. The ATO and the tax profession are joint stewards, working together to shape a system that is fair, transparent, and responsive to the needs of the community.
In that partnership, the ATO is committed to transparency, open consultation, and ongoing support for the tax profession. We actively engage through forums, stewardship groups, and pilot programs. We want you to be part of our consultation processes, and you can find information on how to do that on our website. Your feedback shapes policies, guidance, and digital solutions, ensuring that the system continues to serve the needs of businesses and advisors alike.
Let’s continue to work together – sharing insights, raising concerns, and seeking solutions. As the system evolves, regular engagement and partnership will be the key to ensuring small businesses thrive in a digital future.
- Encourage clients to embrace digital tools, good record keeping, and ongoing education.
- Stay informed through the Small Business Newsroom, Tax Professionals Newsroom, and ATO webinars.
- Promote ethical standards and good governance in every client engagement.
Optimism, Partnership, and Shared Responsibility
In closing, I want to share with you my optimism for the future. The challenges we face are real, but so are the opportunities. Australia’s tax system is strong, and together, we can make it even stronger. By working in partnership, sharing stewardship, and supporting small businesses, we will create a future where compliance is easy, support is tailored, and every taxpayer can succeed.
Thank you for your commitment, your expertise, and your partnership. Let’s continue to be connected in purpose, inspired by possibility, and motivated by the impact we have, together, for small businesses and for all Australians.
Thank you.
Images
A headshot of Second Commissioner Kirsten FishThis link will download a file is available for download from our media centre.