Small Business Stewardship Group key messages 26 November 2024

Frontline Operations

The Australian Taxation Office (ATO) provided insights on the revised payment strategy communication approach and visibility of debts on hold approach based on previously discussed user-testing and consultation sessions.

Addressing collectable debt pilot

A pilot has been initiated on addressing collectable debt, focusing on the top 1% of the debt population. These are the most non-compliant taxpayers, who refuse to engage with the ATO and continuously ignoring SMS and letter reminders, and high-risk taxpayers. For taxpayers who do not engage, non-payment will be addressed much more quickly, such as via a director penalty notice (DPN).

Approximately 30% of directors subject to a DPN, have initiated payment of the collectable debt and approximately 30% have sought to enter a payment arrangement. Directors of multiple entities are being engaged at a ‘group’ level, previously such engagement was done on an entity-by-entity basis.

Vulnerability is a key consideration and the ATO has identified 3 cases where the individuals engaged advised they are in a vulnerable situation. In all cases the ATO is working with the individual considering their respective circumstances.

Engaging with 10 tax agents on the behaviours of their client base has resulted in payment. However, it has also resulted in clients being removed from the agents' client lists due to the clients' inability to engage with the ATO or the agent. Where a client is removed from an agent's list the ATO will follow up that taxpayer directly.

Communication approach

A 4-phase communication approached is being adopted.

• Phase 1 – Informing intermediaries and stewardship groups (done)
• Phase 2 – Leveraging key partners and intermediaries (October to February 2025)
• Phase 3 – Greater transparency (timing and scoping to be confirmed)
• Phase 4 – Expansion of messaging (timing and scoping to be confirmed)

The approach to drive improvements amongst specific groups of taxpayers with poor payment histories will align with the ATO’s broad debt collection strategy.

Member comments

The removal of a client from a tax agent’s client base is not a desirable outcome, as the communication link is lost, creating further disengagement.

Members questioned the effectiveness of the pilot for the most non-compliant taxpayer population who do not have a tax agent. There is no incentive to alter current behaviour for taxpayers who are unable to pay the outstanding debt and do not have the support network and communication avenues an intermediary provides.

Members asked if the proposed communication statements ‘not paying tax affects everyone’ and ‘we’re making it fairer for everyone’ been tested. The statements seem too general, and people may react negatively to them. That is, other people’s fairness is not my concern, when I am a small business owner struggling to survive.

Debts on hold

System changes have been introduced so debts placed on hold after November 2023 are visible in a taxpayer’s account balance through ATO online services, including Online services for business. The ATO plans to make debts placed on hold after 1 January 2017 visible during the 2025 calendar year. When debts on hold are included in the account balance they will remain on hold.

While the ATO is not taking recovery action, the debt remains due and payable, accrues general interest charge (GIC) and any future credits are used to offset the debt. The ATO will remit GIC for the period the debt was not visible in the taxpayer’s account and plans to extend this remission for several months after the debt becomes visible. This aims to give taxpayers time to better understand their position. After this, the ordinary GIC remission approach will apply.

Making debts placed on hold visible helps taxpayers understand their true debt position. This includes understanding where a future credit may be used to offset the debt.

Before the amounts are included in account balances, the ATO will write to taxpayers with a debt of $100 or more to inform of the debt on hold, tax type, period, and what it means for them. Taxpayers with debts on hold less than $100 will not receive a letter. The letter will issue just before taxpayers’ debts on hold are included in the account balance and provides details of where to go for more information and support.

Member comments

Members highlighted a scenario where a small business owner, anticipating a refund based on trusted adviser engagement, receives a letter advising of the debt on hold. Is there scope to invite a response to delay the offset and release the refund if doing otherwise would create financial hardship?

Noting not all taxpayers have the support of a tax agent, members asked if the ATO has considered notification methods, other than informing an intermediary, to support the letter prior to making debts on hold visible.

The title of the letter not direct enough, it should be simple and direct, ‘You have a debt on hold’. Communications need to be specific and clearly articulate the consequence of not engaging. There should be with no scope for misinterpretation. There needs to be certainty about payment plans and the impact of debts on hold.

The ATO noted the letter was developed in consultation with industry representatives and taxpayers. While the ATO would work with a taxpayer experiencing hardship or needing assistance in understanding of what it means for them, a tailored approach is needed to determine the best channel or method to invite further engagement and communication. The letter is one source as are trusted advisers and one-on-one conversations, where suitable. The ATO will continue consultation and engagement with members as this work progresses.

Pay as you go instalment notices

A small business owner member shared their experience of engaging with the pay as you go (PAYG) instalment system and sought the views of other members.

With an awareness of cyber-security and the need to be judicious in the online listing of payment details, going digital has not necessarily improved the client experience, both from an individual and business taxpayer perspective. Pre-digitalisation, paper forms contained all the required information, including the due date, amount, and payment details, that a taxpayer required to comply. Digitalisation has resulted in the separation of the payment details from the online PAYG instalment form.

Accessing payment details via MyGov involves multiple steps for individual taxpayers, and the details can differ to those provided by a tax agent. Business taxpayers view PAYG instalment notices via Online services for business. However, the notice does not include BPAY® details until it is accepted or finalised, which only occurs on the due date. This makes compliance more difficult. There is also a discrepancy with different BPAY payment reference number showing in different areas of Online services for business.

Many small business owners manage multiple entities for PAYG instalment purposes and operate as a group. To ensure compliance, they need to access multiple channels. However, if they wait for a late payment notice, it provides all the details for the respective entities on one page, making it easier to comply.

There is inconsistency with payment amounts across the four quarters within the calendar year, based on new calculations at given points in time.

Member comments

Members supported the need for certainty on payment instalments. Without certainty, it is difficult to forward plan and budget, increasing the possibility of debt. Council rates notices were cited as a good example of providing certainty. These quarterly payments do not change over the course of the year. The ATO explained legislative requirements and the need for system modernisation are constraints, meaning there this is a longer-term future improvement opportunity for the PAYG instalment system.

Improved understanding of PAYG instalment and associated obligations would support better performance of the system. Members highlighted uncertainty on where to obtain necessary support and education tools. Additionally, having visibility of payment details and account balances, which is a known issue for PAYG instalment, would improve a small businesses payment experience. Small business owners rely on their balance sheet to reconcile payments made. It would be useful if funds are visible.

The ATO will continue to consult with members as work progresses from an education, legislative and system change perspective.

Small business focus areas

The ATO provided an update on work to support of the future small business digital tax experience long-term vision and blueprint. This blueprint will be discussed further with members in early 2025.

Pilots and consultation sessions have been conducted testing concepts of ‘real time’ and ‘right time’ reporting and payment to support small businesses meet their obligations. Research and pilot findings indicate:

• Some small businesses are unaware they have the option to report and pay GST monthly.
• There are benefits to business with monthly GST reporting and payment. Smaller more manageable payments assist business better manage their cashflow and can better align to natural business cycles.
• Monthly reporting assists a business to track their performance and make more informed decisions and forecasts from month to month.

Based on these findings, the ATO is taking a phased approach to supporting and encouraging small businesses to report and pay GST more frequently:

• Phase 1 – The ATO will raise awareness and promote the benefits of reporting GST monthly, including aligning to business monthly reconciliation processes, through taxpayer interactions, communication channels and forums.
• Phase 2 – Commencing February 2025, the ATO will support small businesses with a poor compliance history of non-payment or lodgment and incorrect reporting by changing their GST reporting and payment cycle from quarterly to monthly. The change will take effect from 1 April 2025. This will potentially increase touch points with the ATO, enabling better support for businesses to get back-on-track.
• Phase 3 – The ATO will implement additional educational tools and products for client engagement staff to support interactions with the small business community through review and audit activities. Educational support will be based on the insights from changing the reporting and payment cycle to monthly for small businesses with a poor compliance history.

Member comments

Members noted that small businesses should have the opportunity to opt out of any ATO change to their reporting and payment cycle. If businesses targeted by the ATO for monthly reporting express significant pushback, members asked if the transfer can be postponed if the business acts against their outstanding debt by a specific date. The ATO noted small business owners will have the opportunity to discuss the reporting and payment changes relating to their specific circumstances. The change is not just based on data and systems, there will be people involved applying their discretion and judgment to the decision-making process.

Members see the integration with natural business systems as positive, but noted a change to reporting and payment cycles should not inadvertently increase small businesses' workloads to remain compliant. An increase in frequency can be perceived as increased tax and super activity, resulting in potential additional compliance costs. Support from the ATO and external partners, including intermediaries and software providers, is key to ensuring any change is seamless and aligns with a small business' digital eco-system and does not add to compliance costs.

Members also highlighted the need to consider reporting dates and the misalignment within a reporting cycle. The alignment of dates for the various tax obligations within a monthly/quarterly cycle would remove complexity and confusion of what needs to be reported and when. The ATO is aware of the challenges posed by a mixed reporting cycle and is considering communications with the affected population, including small businesses that transition to a monthly withholding reporting cycle, to promote the benefits of aligned reporting cycles. The ATO will seek further feedback from members in early 2025.

Payday Super

The ATO provided an update on the Payday Super reform where from 1 July 2026, employers will be required to pay their employees’ super at the same time as salary and wages.

A media release from the Treasurer on 18 September 2024 and associated Treasury fact sheet, outlines the government’s position and the next steps in implementing Payday Super. From 1 July 2026 employers will be required to pay super guarantee on payday where there is an ordinary times earnings (OTE) payment, and there is a 7 calendar day period from payday to when the funds must be received and accepted by a superannuation fund.

Employers will also become liable for the updated super guarantee charge (SGC) if super guarantee contributions are not received by their employees’ superannuation fund within the 7 calendar days from payday. There will be some limited exceptions to the 7 calendar day requirement for new employees and some out of cycle payment.

The main change to the super guarantee assessment process will include changes to how the SGC is calculated, most notably:

• The super guarantee shortfall will be moving from being calculated on salary and wages, and instead calculated on OTE.
• ‘Nominal interest’ is being changed to ‘notional earnings’ and will be calculated from when the super guarantee was meant to be paid to the account and not the beginning of the period, as is the case now.
• The ‘administration fee’ is being replaced with an ‘administration uplift’ of 60% of shortfall component which will be reduced when employers act to voluntarily disclose issues to the ATO.
• The SGC will be deductible to the employer. Any GIC that accrues on the SGC will not be deductible to the employer.
• There will be a new penalty where an employer does not pay the assessed SGC amounts owed to the ATO in a timely manner.

To support delivery of the Payday Super program, there will be changes to the superannuation ecosystem that supports the payment and reporting of information related to super guarantee contributions. Super funds will only have 3 business days to allocate payments to accounts, down from the current 20 days. Additionally, the ATO will enhance SuperStream focusing on several pain points, including:

• Enabling payments through new payments platforms and accompanying messaging changes.
• Improving error messages to employers ensure they are meaningful, timely and useful, including rationalising and reimaging messages to ensure they provide better clarity of the error and pathways to correct.

The final major change is the ATO will retire the Small Business Superannuation Clearing House (SBSCH) from 1 July 2026. The ATO will communicate with registered users to advise them to transition to other clearing house solutions prior to the SBSCH closure.

Member comments

Members asked if employers with a weekly payment system or cycle will be encouraged to go monthly. The ATO advised there are external requirements such as awards which may determine a payment cycle. However, if there are no requirements in place, the employer is free to choose.

Members noted concerns within the small business and tax agent communities over the unfairness of the penalty process, specifically penalising employers when a third-party financial institution or super fund is at fault. Additionally, the closure of the SBSCH is concerning when coupled with more frequent contribution obligations, increased payment costs and unclear support for users moving to other providers.

The ATO advised the SBSCH is being retired as it is not fit-for-purpose in a payday regime. However, registered users will be informed and advised to transition to other clearing house solutions prior to its closure.

Non-agency member updates

Members shared issues and concerns relating to their community, industry and networks.

The Australian Chamber of Commerce and Industry is involved in government-led consultation on merchant fees and charging fees.

The Council of Small Business Organisations Australia remarked on the current many fronts of consultation and how it is focused on the progression of the anti-money laundering bill.

The Small Business Debt Helpline acknowledged the advocacy helpdesk as a major step forward in the delivery of support within the community and emphasised the need for care in message delivery.

The UNSW Tax and Business Advisory Clinic has received an ARC Discovery Grant entitled Tax justice: Closing policy gaps to lessen intimate partner financial abuse.

Things are tough within the small business community, with many small businesses being at a tipping point. Many businesses are closing due to fatigue with no succession plan. This needs to be considered in relation to any proposed firmer action and enforcement activity. Consideration should also be given to raising the government threshold for single procurement quotes from $5,000 to $10,000. Costs have increased and this should be reflected in procurement processes.

Concerns were raised about the introduction of the Tax Agent Services Act 2009 determination, despite subsequent welcome revisions, and its implications for tax agents. Additionally, there were apprehensions regarding the impact of proposed superannuation taxation changes on unrealised capital gains, particularly in the agricultural sector, the costs of complying with anti-money laundering obligations, and the implications of extending SGC obligations to younger employees.

Political unrest and pending political change internationally mean Australian small businesses and their advocates need to consider how they can ensure certainty, and how any future change can be advantageous to Australia.

The Rural Doctors Network is working with the university sector to influence the medical and health training programs to include business acumen training, and with peak health bodies on research into what makes a health and medical business succeed or fail.

The National Rural Health Awards recognise the best in the health profession and those with good business management skills. Members shared information on some of the recent award recipients.

Agency updates

Treasury

The last scheduled week of parliament commences on 25 November 2024. Several bills will be tabled. Treasury is also preparing for the Mid-Year Economic and Fiscal Outlook. The government had requested pre-budget submissions are provided by 31 January 2025.

A national small business strategy is being developed. This non-binding, principles-based document outlines the contributions small businesses make to the economy and community, the collective vision for the small business sector and a shared commitment for a coordinated, collaborative, and cohesive national approach to small business support and reform. Consultation has occurred and the draft strategy will be discussed at the next small business Ministers' meeting on 6 December 2024.

ATO

The ATO is launching the Getting it right strategy on 28 November 2024. The strategy will integrate communication and engagement activities and treatment approaches to provide transparency on the identification of and response to risks.

The ATO will contact selected growing businesses and entities who meet the criteria for medium and emerging private groups over the next month. These criteria include businesses with an annual turnover greater than $10 million that are not public or foreign owned and are not linked to a high wealth public group. The ATO has identified key areas where errors are being made and will communicate how medium and emerging private groups can avoid these mistakes.

Australian Small Business and Family Enterprise Ombudsman

The Small Business Pulse was released on 26 November 2024. This quarterly report captures a range of data and provides indicators of small business health.

Treasury is conducting an organisation-wide review of the Australian Small Business and Family Enterprise Ombudsman, with a focus on its assistance function and other areas outlined in the consultation paper.

Attendees

Attendees list

Organisation	Members
ATO	Will Day (Co-chair), Small Business
ATO	Andrew Watson, Individuals and Intermediaries
ATO	Emma Tobias, Small Business
Australian Chamber of Commerce and Industry	Samantha McKenna
Australian Small Business and Family Enterprise Ombudsman	Bruce Billson (Co-chair)
Chartered Accountants Australia and New Zealand	Susan Franks
Institute of Certified Bookkeepers	Matthew Addison
Real Estate Institute of Australia	Jock Kreitals
Rural Doctors Network	Richard Colbran
Small Business Debt Helpline	Helen Davis
Small Business Operator	Angela Harlen
Small Business Operator	Donna Niazov
Small Business Operator	Lisa Dwyer
Small Business Operator	Paul Meissner
Small Business Operator	Tony Sama
Treasury	Bede Fraser
UNSW Tax & Business Advisory Clinic	Ann Kayis-Kumar

Guest attendees

Guest attendees list

Organisation	Attendee
ATO	Adam O'Grady, Frontline Risk and Strategy
ATO	Andrew Finch, Individuals and Intermediaries
ATO	Anita Challen, Frontline Risk and Strategy
ATO	Ben Foster, Enterprise Solutions and Technology
ATO	Emma Chamberlain, Frontline Risk and Strategy
ATO	Kath Philp, ATO Corporate
ATO	Michael Morton, Small Business
ATO	Michelle Allen, Superannuation and Employer Obligations
ATO	Susan Dredge, Individuals and Intermediaries
ATO	Tony Poulakis, Small Business
ATO	Travis Deane, ATO Corporate
Council of Small Business Organisations Australia	Adele Sutton
Institute of Public Accountants	Irwin Bushnell
Restaurant and Catering Industry Association	Chris Alchian
Treasury	Jacqueline Cooke

Apologies list

Apologies list

Organisation	Member
ATO	Anna Longley, Frontline Risk and Strategy
ATO	Elissa Walker, Enterprise Solutions and Technology
ATO	Emma Rosenzweig, Superannuation and Employer Obligations
Australian Automotive Aftermarket Association	Lesley Yates
Australian Retailers Association	Ben Cornel
Australian Veterinary Association	Moss Siddle
Council of Small Business Organisations Australia	Luke Achterstraat
Direct Selling Association of Australia	Nina Rossi
Indigenous Business Australia	Chris Germain
Institute of Public Accountants	Tony Greco
Restaurant and Catering Industry Association	Suresh Manickam
Small Business Operator	Shannon Smit
Supply Nation	Kate Russell
Treasury	Anthony Seebach