Revenue collection
Cash collections
In 2021–22, net GST cash collections (excluding non-GIC penalties) were $73.6 billion, including net Department of Home Affairs collections of $5.7 billion. This was 2.3% (or $1.7 billion) above the 2021–22 Budget estimate of $71.9 billion and 1.2% (or $0.9 billion) above the revised Budget estimate of $72.7 billion.
The upward revision from the original Budget estimate to the revised Budget estimate was attributable to higher-than-expected collections in 2020–21 flowing through to 2021–22, partially offset by weaker economic forecasts for 2021–22. The final cash collections outcome for 2021–22 was higher than the revised estimate, largely due to stronger-than-expected collections from March activity statements.
The 2021–22 cash outcome was 0.7% (or $0.5 billion) higher than in 2020–21. Collections during 2020–21, however, included payments of deferrals that were granted during 2019–20.
Cash collections and revenue accruals
In 2021–22, net GST accrued on a tax liability method (TLM) was $76.0 billion. TLM is defined as being the earlier of the cash payment being received or the associated liability being recognised. The difference between net GST accruals and net GST cash collections was $2.4 billion, largely reflecting an increase in unpaid debt.
The estimated total statement outcome for business activity statements (BAS) from June 2021 to May 2022 (BAS that were due in 2021–22) was $68.8 billion, $4.3 billion higher than the corresponding period in 2020–21. This was mainly due to strength in the professional, scientific and technical services and wholesale trade sectors. Partially offsetting these were higher refunds to the public administration sector.
|
2017–18 $b |
2018–19 $b |
2019–20 $b |
2020–21 $b |
2021–22 $b |
|---|---|---|---|---|---|
Total GST revenue (accrual) |
64.7 |
66.7 |
66.7 |
72.6 |
76.0 |
Total GST revenue (cash) |
63.1 |
65.2 |
60.2 |
73.1 |
73.6 |
GST revenue Home Affairs cash (net) |
3.9 |
4.2 |
4.2 |
4.8 |
5.7 |
Figure 2: Revenue (cash) outcome
Measurement and effectiveness
The ATO uses a suite of measures that provide insights into the health and operation of the GST system and the impact of our actions. These performance measures include:
- GST gap
- voluntary compliance ratio (VCR)
- total revenue effects (TRE)
- GST assured.
Three of our performance measures (GST gap, VCR and GST assured) are ‘lag indicators’ that tell us about past performance. We supplement these with the TRE measure which measures our impact on tax collection. This measure combines the revenues directly from audit actions with the increased revenue from influencing taxpayers to voluntarily pay the right amount of tax and relates to the additional revenue collected in 2021–22 (noting the amount can relate to prior tax years).
GST gap
The GST gap estimates the difference between GST collected and the amount that would have been collected if all taxpayers were fully compliant with tax law – this second amount is known as theoretical GST.
There are 2 types of GST gap:
- Gross GST gap – the gap prior to the impact of our engagement
- Net GST gap – the gap after our intervention.
For 2020–21 (the most recent year where data was available), we estimate a net GST gap of $4.1 billion, which is 5.9% of theoretical GST revenue. This means businesses paid over 94% of theoretical GST. The gross gap is estimated to be $6.1 billion, or 8.6% of theoretical GST. The gap excluding non-pursuable debt is $2.5 billion or 3.7% of theoretical GST.
Figure 3: Gross and net GST gaps
After declining (for only the second time) in 2019–20, theoretical GST revenue increased by 4.1% in 2020–21 to approximately $70.4 billion. The major components of the theoretical GST base that drove the change were:
- Overall household consumption spending increased by 1.8% in 2020–21, well below historical trend growth (4.9%). Within household consumption, there is a gradual long-term move away from purchases that attract GST, towards purchases that do not, accelerating over the last 2 years.
- Spending on dwelling-related components of the theoretical GST base rebounded in 2020–21, as policy measures had a positive impact on demand for alterations and additions.
While international comparisons are difficult due to different VAT/GST regimes (that is rates, base, turnover thresholds and so forth), Australia’s GST gap compares favourably with similar international tax jurisdictions including comparable European Union member countries.
ATO action to reduce the GST gap
A range of taxpayer actions can impact the GST gap and include:
- non-reporting of GST
- under-reporting of GST
- over-claiming of refunds
- non-payment of GST liabilities.
These behaviours range in severity from honest reporting errors to deliberate non-compliance.
Our compliance programs have a balance of prevention, early engagement and assurance activities and are targeted to those taxpayers and industries that are higher risk. Key examples include the following:
- Improving our risk models by using better data and more advanced analytical techniques to detect suspect GST refunds as well as streamlined treatments for fraudulent refund lodgments involving transaction fraud or identity crime.
- A letter strategy advising property developers where sales have been unreported, providing them the opportunity to self-correct without penalty. Where the developer does not respond we move to firmer action. This strategy requires minimal contact between the ATO and the taxpayer.
- Ensuring large businesses pay the right amount of GST through a combination of one-to-one and one-to-many approaches, such as the justified trust assurance programs and advice and guidance strategies. A specific example is the guidance for GST apportionment in retail banking, which has led to behavioural change across the industry.
- Nudge messaging – for example, where a BAS lodged online contains an identifiable reporting error, a follow-up message recommends that taxpayers check their BAS before they lodge.
- Addressing small business tax performance – specifically the inadvertent tax-related errors made by small businesses – with a range of preventative and educational activities tailored to meet taxpayers’ specific needs. These same activities also assist those who are struggling with the complexity of their reporting requirements. Our online learning products and educational services relevant to the life cycle of a small business include
- Preventing compliance issues before they arise by supporting those who want to do the right thing. We help these taxpayers reduce mistakes through reminders, nudges, improved information on ato.gov.au, and public advice and guidance.
- Taking a firmer approach with taxpayers who deliberately evade their GST and other tax obligations.
- Embedding our GST work programs across all taxes – to deliver more effective and efficient risk management, and enhance the taxpayer experience.
We will continue to work towards closing the GST gap, by:
- building trust and confidence within the community, through the GST Compliance Program
- achieving GST compliance through other government-funded programs, including the Shadow Economy, Serious Financial Crime and Phoenix taskforces.
Australian tax gaps – overview provides further information on the concept of tax gaps, including why and how we measure them, and a summary of the latest available tax gap data.
GST voluntary compliance ratio
The GST VCR complements the GST gap by measuring the proportion of taxpayers fully compliant with the 4 pillars of compliance – registration, lodgment, reporting and payment. To be fully compliant, a taxpayer must:
- be correctly registered
- lodge by the due date
- report the correct amount of GST
- pay the correct amount on time.
Both the proportion of taxpayers voluntarily complying with their obligations and the value of GST remitted voluntarily are important indicators of the health of the GST system and community confidence.
Measuring the VCR
The GST VCR is measured at 2 levels:
- Taxpayer level – the number of taxpayers who completely meet all their obligations for the financial year.
- GST value level – the amount of GST that is voluntarily remitted to us in accordance with the law for the financial year.
VCR trends and latest findings
Using our strict VCR test, we estimate that 26.5% of taxpayers voluntarily complied in 2020–21. This does not include minor unintentional late payments or lodgments. The lower than usual percentage recognises the continued impact of COVID-19 as well as various natural disasters. The ATO and Australian Government’s response to support businesses through these challenges is not fully reflected in the strict VCR test.
A second way to calculate the VCR is what is known as the relaxed VCR test.
This method adjusts for:
- taxpayers who have no total business income in the year (nil BAS)
- taxpayers who are only considered non-compliant for having a single late BAS lodgment/payment.
In making these adjustments, the relaxed VCR increases to 75.3% and recognises there is a significant proportion of taxpayers who aim to do the right thing but were late with either a single lodgment or payment.
Figure 4: VCR GST value and taxpayers
Total revenue effects
GST total revenue effects (TRE) is the measure we use to understand the revenue impact of the activities we undertake to improve taxpayer compliance. These activities ultimately improve levels of willing participation in the systems and programs we administer. Understanding and measuring the impact of our activities helps us to develop effective new strategies and improve existing ones. It is also a useful signpost of our shift in focus from ‘corrective’ to ‘preventative’ strategies, which cannot be detected by measuring audit action alone.
In calculating TRE, we include the following:
- The collection of liabilities that are directly connected to adjustments we make through our audit actions to ensure the right amount of GST is paid. This includes the value of incorrect claims we stopped prior to payment (previously part of audit yield). The tables below provide 2 versions of liabilities
- liabilities including penalties and interest
- liabilities excluding penalties and interest. Penalties are a small component of audit actions and are not distributed to the states and territories under the Intergovernmental Agreement on Federal Financial RelationsExternal Link.
- Estimated additional tax paid voluntarily by clients, where there is a clear causal connection with our engagements. This includes our preventative actions, as well as taxpayers’ sustained compliance following earlier compliance engagements (previously categorised as wider revenue effects).
- Revenue associated with our actions to improve or enforce lodgment of due returns and statements as well as sustained lodgment compliance following these actions (previously included across both the audit yield and wider revenue effects categories).
In 2021–22, the TRE from all these activities totalled $5,028 million (excluding penalties and interest).
For more information on total revenue effects, see ato.gov.au/totalrevenueeffects.
|
|
2018–19 $m |
2019–20 $m |
2020–21 $m |
2021–22 $m |
|---|---|---|---|---|---|
Excluding penalties and interest |
Liabilities |
3,164 |
2,645 |
2,339 |
5,407* |
Preventative actions and sustained compliance |
253 |
370 |
426 |
390 |
|
Sustained lodgment compliance |
707 |
477 |
370 |
224 |
|
Liabilities raised |
4,124 |
3,493 |
3,135 |
6,020 |
|
Including penalties and interest |
Liabilities |
3,386 |
2,827 |
2,798 |
5,805* |
Preventative actions and sustained compliance |
253 |
370 |
426 |
390 |
|
Sustained lodgment compliance |
707 |
477 |
370 |
224 |
|
Liabilities raised |
4,346 |
3,675 |
3,594 |
6,419 |
|
|
2017–18 $m |
2018–19 $m |
2019–20 $m |
2020–21 $m |
2021–22 $m |
|---|---|---|---|---|---|---|
Excluding penalties and interest |
Audit actions/ |
1,477 |
1,223 |
1,070 |
1,132 |
3,389 |
Lodgment actions |
1,205 |
1,350 |
1,221 |
702 |
1,025 |
|
Preventative actions and sustained compliance |
165 |
253 |
370 |
426 |
390 |
|
Sustained lodgment compliance |
696 |
707 |
477 |
370 |
224 |
|
Total |
3,512 |
3,533 |
3,139 |
2,631 |
5,028 |
|
Including penalties and interest |
Audit actions/ |
1,513 |
1,244 |
1,162 |
1,157 |
3,451 |
Lodgment actions |
1,308 |
1,408 |
1,264 |
727 |
1,052 |
|
Preventative actions and sustained compliance |
165 |
253 |
370 |
426 |
390 |
|
Sustained lodgment compliance |
696 |
707 |
477 |
370 |
224 |
|
Total |
3,682 |
3,612 |
3,273 |
2,679 |
5,117 |
Audit actions and incorrect claims stopped
In 2021–22, we estimate that our audit actions and incorrect claims stopped contributed $3,389 million (excluding penalties and interest) in total revenue effects.
Prevention and sustained compliance
These wider revenue effects include:
- the impact we have on improving voluntary compliance following an initial compliance action (sustained compliance)
- our early interventions and preventative actions that improve voluntary compliance prior to lodgment.
Lodgment actions
For the first part of 2021–22, our client engagement approach recognised the continuing challenges of COVID-19 and natural disasters. As such, we continued the strong focus on help and assistance for affected clients.
In 2021–22:
- lodgment-related activities contributed $1,025 million (excluding penalties and interest) in total revenue effects
- sustained lodgment compliance following action contributed $224 million (excluding penalties and interest) in total revenue effects.
GST assured
GST assured is an estimate of the proportion of tax that we are highly confident is correctly reported.
This measure is based on the concept of ‘justified trust’. Justified trust is achieved and GST is considered to be assured when we have high-quality evidence that the reporting of GST is complete and accurate.
For businesses (particularly larger businesses), we primarily assure GST by reviewing objective evidence obtained through one-to-one engagements. GST results are primarily driven by public and multinational businesses, where we provide assurance on a case-by-case basis. There was $518 million of GST assured in the public and multinational businesses sector in 2019–20.
In practice, we cannot gather third-party data or other information to compare against all GST reported on the BAS. As such, our tax assured estimates will always be lower than the real amount of tax that is correctly reported. Where we cannot gather information to assure tax, we rely on our broader risk management approaches to provide us with confidence over the rest of the total tax reported.
It is estimated $680 million (1.1%) of total net GST BAS outcome of $60 billion could be assured for 2019–20 (the most recent year that estimates can be made).
The decline in GST assured since 2018–19 was predominately due to the impact of COVID-19 on our assurance work programs. However, we expect the percentage of GST that will be assured will increase between 2021 and 2023, due to the justified trust funding attached to the GST Compliance Program providing assurance over the largest businesses.
|
2017–18 |
2018–19 |
2019–20 |
|---|---|---|---|
GST assured ($m) |
4,878 |
3,547 |
680 |
Net GST BAS outcome ($b) |
60.2 |
61.0 |
59.6 |
Percentage assured (%) |
8.1 |
5.8 |
1.1 |