Welcome
The co-chairs, Dr Michael Schaper and Will Day, welcomed attendees with an acknowledgment of country. No conflicts of interest were declared. Members were reminded of confidentiality requirements.
The endorsed SEAF Charter 2023–24 was provided to members. Changes to Agency representatives were noted and all outgoing representatives were thanked for their contribution to the forum.
Tax system health check
The ATO presented on the latest Shadow Economy Tax Gap findings including:
- footprints of shadow economy
- tax effects of shadow economy behaviours in the transactions and income-based taxes
- overall shadow economy taxes, including administered programs by the ATO, grew from $14.3 billion to $20.7 billion from 2015–16 to 2020–21
- growth in the tax effects of the shadow economy, 7.7% over 2015–16 to 2020–21 exceeded nominal gross domestic product growth over the same period, 4.6%
- the performance is mixed across tax types with the tax effects of shadow economy tobacco excise growing very strongly, 29.6%.
|
Action item |
20231108-1 |
|---|---|
|
Due date |
February 2024 |
|
Responsibility |
ATO performance measures & tax gap |
|
Action item details |
Provide information on how organised criminal activities have been factored into the tax gap estimates. |
SB tax gap–SB random enquiry program insights
The ATO shared key insights into the small business (SB) random enquiry program including:
- Behaviours and revenue impacts observed in the small business random enquiry program sample.
- Behavioural impacts at the small business income tax gap level with a breakdown of the shadow economy activities.
- Industry view of the shadow economy cases in terms of average income tax shortfall and average cash income comparing to misreported income.
|
Action item |
20231108-2 |
|---|---|
|
Due date |
February 2024 |
|
Responsibility |
ATO small business tax gap |
|
Action item details |
Confirm the level of mental health trainings undertaken by the ATO to assist with challenges faced by small businesses. |
|
Action item |
20231108-3 |
|---|---|
|
Due date |
February 2024 |
|
Responsibility |
ATO small business tax gap |
|
Action item details |
Provide additional analysis on the types of shadow economy behaviours observed in micro businesses as opposed to small businesses. |
|
Action item |
20231108-4 |
|---|---|
|
Due date |
February 2024 |
|
Responsibility |
ATO small business risk & strategy |
|
Action item details |
Provide an industry-based trend analysis on ABN registration without a GST role. |
Alcohol tax gap
The ATO discussed the alcohol tax gap including:
- high-level summary of the gap
- the net tax gap for the 2021–22 has been estimated at $745 million, or 9.1%
- illicit alcohol activity in the shadow economy is responsible for approximately 90% of the alcohol tax gap
- primary risks and drivers
- treatment strategies implemented
- opportunity for targeted actions and improvements.
|
Action item |
20231108-5 |
|---|---|
|
Due date |
February 2024 |
|
Responsibility |
ATO excise centre |
|
Action item details |
Provide relevant guidance material to help the community identify presence of illicit alcohol. |
Member updates
Industry members shared key observations which focussed on current environmental pressures including:
- some industries are concerned with the impacts of the Industrial Relations Reforms Bill
- small businesses are struggling to keep up with the increasing reporting obligations which is shared by their professional advisors
- some small businesses are facing financial uncertainty with a rising advisory demand for professional bodies
- small businesses are impacted by cash flow issues with a growing trend in payment related disputes.
Agency updates
Treasury provided an update on the review of the Modernising Business Registers (MBR) program including:
- the final report was released in August 2023 on Treasury’s website
- it was initially projected to be completed by the 2023–24 financial year at a cost of $480.5 million
- due to several factors, including a significant underestimation of program complexity, the current costs of the MBR program are approximately 5 times the amount estimated
- the review concludes that the responsible and best available option for government is to stop the MBR program on the basis that the considerable additional investment is not justified when measured against the benefits
- it recommended the return of registry functions from the ATO to a new division in Australian Securities and Investments Commission while the director ID regime will remain under the Australian Business Registry System, with an additional targeted investment in uplifting data integrity and quality.
|
Action item |
20231108-6 |
|---|---|
|
Due date |
February 2024 |
|
Responsibility |
Treasury |
|
Action item details |
Provide an update on the timeframe of a five-year report into the shadow economy as recommended by the Australian National Audit Office. |
The ATO outlined the key achievements of the Shadow Economy Program from 1 July to 30 September 2023 including:
- We have undertaken more than 80,000 activities and raised more than $936 million in liabilities.
- The Australian Border Force (ABF) led Illicit Tobacco Taskforce has seized just under 4 tonne of loose tobacco and over 9 million cigarettes, equating to $15.4 million in forgone excise.
- The ATO Tax Integrity Centre have shared 969 shadow economy related community tip-offs with Shadow Economy Taskforce member agencies.
- The Shadow Economy Taskforce have made 45 disclosures to member agencies relating to illicit tobacco, money laundering, worker exploitation, visa fraud, welfare fraud and organised crime.
The ATO provided an update from the recent New Zealand Tax Conference organised by the New Zealand Inland Revenue including:
- the re-emergence of shadow economy behaviours, including cash wages and illicit tobacco were observed by New Zealand counterparts
- shared concerns on the operation of the Electronic Sales Suppression Tools
- cyber security for small businesses remains a focus, given compromised identities have been used to apply for COVID-19 support payments.
The ABF shared insights into the Australian Trusted Trader (ATT) including:
- The intent is to secure the borders and streamline legitimate trade through improving certainty in export markets and expediting the flow of the cargo in and out of Australia.
- It is administered by the ABF to accredit Australian businesses who can demonstrate compliant trade practices and a secure international supply chain.
- The ATT list represents trusted businesses who import and export, as well as those who provide services including logistics, customs brokerage and transport.
The ABF has ongoing partnerships with other agencies to protect Australia’s borders including the combating illicit tobacco importation. The ATT program highlights the value of partnering with industry.
Other business
- The proposed meeting schedule and topics for 2024 meetings were discussed including:
- A deep dive into sham contracting and associated industry education campaigns.
- Consideration of inviting representatives of other industries to present relevant topics.
- Recommendation of avoiding any meeting scheduled for the period from 14 and 21 May due to the Federal Budget.