Agency updates
ATO
As COVID-19 restrictions ease, the ATO is recommencing reviews and audits with small businesses. The ATO continues to show empathy and understanding for each client’s unique circumstances.
The small business income tax gap estimate was refreshed in the ATO Annual Report 2020–21. The gap is estimated at 12.7% in 2018–19 and is a preliminary estimate based on a reduced sample size due to the impacts of COVID-19 on the random enquiry program. The estimate will be calculated from a larger sample size in 2021–22.
The Treasury Laws Amendment (2021 Measures No. 7) Bill 2021External Link, requiring electronic platform operators to provide information on transactions made through the platform to the ATO, is currently before Parliament. Once passed, the ATO will work with industry associations to understand impacts and to raise awareness for impacted businesses.
There has been strong support for director identificationExternal Link (ID) and uptake to date has exceeded expectations, considering it has been a soft launch.
The ATO recognises the need to raise awareness on exactly who is a director as many small business owners do not readily identify themselves as such. The ATO will target small businesses with relevant communications as we move closer to going live (out of public beta) early next year.
Member comments
- Observation that some tax gap media messaging appears to be placing ‘blame’ on small business for contributing disproportionately to the aggregate income tax gap – The ATO stressed its own messaging highlight that a significant majority of small business willingly pay their tax.
- Concern whether the cost of reporting requirements will be passed onto small business, particularly in the food service industry – The ATO noted there has been a lot of discussion that data already captured in systems is aligned to the law intent. The ATO will look at how it obtains data as reasonably as possible and will work with associations as soon as law is passed. Members are keen to be involved.
- The simplicity of the director ID registration process was noted by several members.
- Will director ID be a central place to update all addresses and will it be listed as a tax record under online services for agents – The ATO noted that the address function is still under design.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
Matters currently being raised include least-cost routing, payment disputes, and superannuation guarantee penalty issues.
The Discretionary Mutual Fund (DMF) review interim report was released on 20 October 2021 and has generated a lot of interest. The interim report found that a DMF may be a suitable way to address the insurance crisis faced by Australia’s amusement, leisure and recreation sector.
The Small Business Tax Concierge Service continues to provide insights on tax issues faced by small businesses.
Issues brought to the Alternative Dispute Resolution assistance line include franchising, leasing, digital service platforms, business exit options, and some disputes with government over contracting terms. New franchising Alternative Dispute Resolution mechanisms are available, including group mediation and the option to go to arbitration under franchising disputes (if parties agree).
A member explained there is some confusion regarding the role of Australian Financial Complaints Authority (AFCA) regarding small business finance disputes. ASBFEO confirmed it is aware of the issue and is working with AFCA to clarify the situation.
Treasury
Treasury is currently supporting Mid-Year Economic and Fiscal Outlook preparation and progressing a range of 2021–22 budget measures including consultation on the cessation of employment taxing point for employee share schemes.
ATO and Treasury are considering the impacts of the High Court decision regarding taxation of working holidaymakers. The High Court decision is only relevant where a working holidaymaker is both an Australian resident for tax purposes and from a country where the tax treaty with Australia has an enforceable non-discrimination article.
On 5 October 2021, an announcement of Consumer Data Rights (CDR) rule amendments was made to enable consumers, including small businesses, to share CDR data with their trusted adviser.
The Payment Times Reporting Scheme is in place and the first reporting window closed on 30 September 2021 for businesses with an end of financial year date of 30 June.
Ongoing Franchising Reforms are underway including finalising an approach on increasing penalties in the franchising code and consideration of whether there should be a standalone automotive franchising code.
Member comments
Several members indicated that Government support for small business is essential in 2022 as an ongoing response to COVID-19. There is a real fear that economic activity will drop post-Christmas and small business will continue to struggle.
CDR rule amendments for sharing data with a trusted adviser is a step forward. However, there is an ongoing concern about the disruption CDR could have on the relationship between trusted adviser and client. Treasury will continue to monitor this issue.
Member discussion
Discussion focused on what members are hearing from small business about COVID-19 impacts on small business.
- Some businesses are impacted by COVID-19 restrictions more than others. While issues are similar across the country, the timing varies. Border closures are impacting confidence, particularly in tourism and service industries.
- The ‘multi-speed economy’ is making it difficult to draw definitive conclusions about the overall health of the small business sector.
- Labour shortages and supply chain issues are the most common challenges across all industries. As a result, small business owners are overworked and working ‘in’ and not ‘on’ their businesses.
- The combination of labour shortages and a fatigued workforce is impacting businesses’ ability to operate at full capacity over the Christmas period.
- Businesses are taking longer to understand their true debt position and are fearful of what it looks like. Deferred debt is creating a challenge for tomorrow, particularly in relation to deferred lease payments.
- Businesses are delaying making investment decisions due to debt burden, uncertainty and supply chain issues.
- Increased cost of materials and labour are reducing profit margins. High turnover is not currently translating to high profit margins.
- There are some reports of price gouging in an effort to make up for lost revenue.
- Small business is still in the midst of COVID-19 which is impacting mental health. Exhaustion and anxiety about the future are big issues.
- The cost of freight has increased significantly, and limited international freight capacity is being prioritised to China and the USA over Australia.
- Consumer patterns have not returned to normal. The usual ‘Christmas bonanza’ cannot be relied upon.
- Online sales may not generate profit until next year.
- Some associations are seeing declining membership as businesses exit the industry.
- Radically reduced levels of traffic in CBDs are continuing.
- Audit action by some state agencies relating to government grants and payroll tax has produced nervousness which may flow on to clients engaging with the ATO.
- Communication with small businesses following compliance activity needs to be effective – especially at this time, for example a recent ATO Super Guarantee audit where the outcome was not effectively communicated. The ATO followed-up on this experience out-of-session.
Incentivising e-invoicing for small business
With approximately 89% of small and medium businesses processing invoices manually and over 1.2 billion invoices being exchanged in Australia annually, e-invoicing provides significant productivity and cost efficiency benefits for Australian businesses if adopted more widely.
To date the ATO has focused efforts on raising awareness among intermediaries, with momentum growing in this space. Small business engagement activities are planned for 2022 which will focus on the benefits and how to get started, including low-cost options.
Representatives from MYOB and Xero provided a demonstration of e-invoicing in their products. Benefits highlighted included ease of use, increased security, view of history, efficiency, less data handling, fewer errors, and reduced costs.
Member comments
Members suggested the ATO can support small business awareness of e-invoicing by:
- being considerate of timing as business attention is likely to be focused on COVID-19 recovery
- developing tailored case studies that highlight benefits and efficiencies, including the opportunity to spend less time on invoicing.
ATO’s debt and lodgment approach for small business
Over the past two years the ATO has taken a tailored approach to lodgment and payment in response to COVID-19.
The ATO’s approach is to minimise the need for firmer debt collection action through our enhanced engagement. The more the ATO knows about clients and their circumstances, the better equipped it is to help.
The ATO helped engaged clients get back on track using additional time to lodge, payment plans and remissions of interest and penalties. The ATO cannot help clients who do not engage with us.
The ATO has resumed firmer debt collection activity, prioritised for clients that represent higher risks and who do not engage. The ATO is very conscious of using these types of activities sparingly and with empathy.
Member comments
The following insights were shared about why small businesses might not be engaging with the ATO or their trusted advisers to discuss their debt position and how the ATO can better tailor its communication efforts.
- The topic is stressful and forces clients to acknowledge the debt.
- Many are just getting back into positive cash flow and are reluctant to part with money due to ongoing economic uncertainty.
- Navigating online services and websites is challenging.
- Businesses are not hearing the message that the ATO is here to help and support.
- It is important that businesses know their debt position.
- Businesses are busy and not in a position to take phone calls during the day as it adds to the stress.
Members shared a diverse range of perspectives on how the ATO can engage and communicate with small businesses, with all agreeing that empathy and human interaction is critical.
Single Touch Payroll Phase 2 implementation
Single Touch Payroll (STP) Phase 2 reporting commences 1 January 2022 and is primarily designed to support the social security system and to assist related reforms to income reporting by Services Australia customers.
The ATO recognises that the changes have not been front of mind for many employers because of COVID-19 impacts, so is taking a pragmatic and reasonable approach to support employers to transition to STP Phase 2.
- If an employer’s Digital Service Provider (DSP) is ready for 1 January 2022 and they can start reporting, the ATO will help and support them to start.
- If an employer can start reporting by 1 March 2022 they will be considered to have started on time – they will not need to apply for a deferral.
- DSPs who, despite their best efforts, may not be ready by 1 January 2022, now have deferral dates throughout 2022. Employers will need to speak to their DSP to learn their deferred start date.
- For employers who still need more time to transition to STP Phase 2, an online deferral application process will be available from December 2021.
Engagement and communication activity continues and includes ATO open forums and DSP-hosted events. The ATO has conducted a well-attended webinar series over the last few months. Recorded webinars are available on the ATO website. Frequently asked questions will be available on ato.gov.au as an additional resource for employers.
The ATO will be writing to a small population of employers who will be getting ready for STP Phase 2 in the first half of 2022 to raise awareness on what they need to do and where to find information.
Preliminary analysis demonstrates that reporting through STP Phase 2 creates significant time efficiencies for the employer. This is not withstanding the investment required upfront to transition. This message will start to be built into communications and awareness activities.
Member comments
The STP Phase 2 transition may not be as resource intensive as some perceive. For many it will be an easy adjustment, especially if the benefits are clearly understood. This message needs to be communicated more broadly.
The ATO noted the need to develop testimonials from those who have transitioned, highlighting positive experiences to help win hearts and minds.
Small Business Stewardship Group 2021 year in review
The ATO provided a brief year in review, including:
- the return to a quarterly meeting model using a hybrid WebEx/hub model for our first two meetings before shifting back to WebEx only following the resumption of COVID-19 restrictions
- several changes in membership, including changes in our small business representatives and personnel changes within several industry associations
- the group continues to be well-regarded with many keen to join
- recognising some additional industries, for example, building and construction, tourism should be represented.
Member comments
The SBSG is a valuable group with most members wanting to continue to be involved.
Group meetings are extraordinarily beneficial from a consultation and information-sharing perspective.
The group builds relationships and covers a lot of material.
The ATO should consider an all-in meeting for all consultation groups once or twice a year.
Tasks should be assigned to sub-groups to manage and report back to the group.
Members are encouraged to provide any additional views on how the group operates and any opportunities for improvement.
Attendees
Organisation |
Member |
|---|---|
ATO |
Deborah Jenkins (Co-chair), Small Business |
ATO |
Andrew Watson, Small Business |
ATO |
Emma Rosenzweig, Superannuation and Employer Obligations |
ATO |
Michelle Crosby, Australian Business Registry Services |
ATO |
Vivek Chaudhary, Lodge and Pay |
Australian Chamber of Commerce and Industry |
Jenny Lambert |
Australian Retailers Association |
Jason Robertson |
Australian Small Business and Family Enterprise Ombudsman |
Bruce Billson (Co-chair) |
Australian Veterinary Association |
Moss Siddle |
Business Enterprise Centres Australia |
Graham Baxter |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Council of Small Business Organisations Australia |
Alexi Boyd |
Department of Industry, Science, Energy and Resources |
Peter Cully |
Direct Selling Association of Australia Inc |
Gillian Stapleton |
Indigenous Business Australia |
Greg Ellis |
Institute of Certified Bookkeepers |
Matthew Addison |
Motor Trades Association of Australia |
Richard Dudley |
Real Estate Institute of Australia |
Jock Kreitals |
Restaurant and Catering Industry Association |
Hugo Robinson |
Small business operator |
Deborah Cook |
Small business operator |
Paul Meissner |
Small business operator |
Tony Sama |
Treasury |
Bede Fraser |
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Anthony Marvello, Technical Leadership and Advice |
ATO |
Chontelle Weyman, Superannuation and Employer Obligations |
ATO |
Jason Lucchese, Superannuation and Employer Obligations |
ATO |
Julia Cook, ATO Corporate |
ATO |
Les De Wind, Lodge and Pay |
ATO |
Mark Stockwell, Enterprise Solutions and Technology |
ATO |
Natascha Bowett, Enterprise Solutions and Technology |
ATO |
Sally Bektas, ATO Corporate |
MYOB |
Mandy Hicks |
Xero |
Simon Foster |
Apologies
Organisation |
Member |
|---|---|
Australian Lottery and Newsagents Association |
Michael Renshaw |