Small Business Stewardship Group key messages 2 May 2024

Agency updates

Treasury

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 remains before parliament. The bill includes the small business energy incentive and the instant asset write-off for small business entities.

Consultation on exposure draft changes to the Payment Times Reporting Act 2020, delivering on the government’s commitment to improve small business payment times, concluded on 29 April 2024.

ATO

The instant asset write-off measure is before parliament. A Senate amendment was passed to increase the asset value from $20,000 to $30,000 and expand the measure to medium-sized businesses. The Australian Taxation Office (ATO) will consider the consequences for current system design and communication channels.

A super guarantee nudge letter pilot commenced in March 2024. The ATO is contacting a limited number of employers who appear to have outstanding super guarantee obligations according to Single Touch Payroll and fund data reported to the ATO. Employers who do not agree with information in the letter can contact the ATO to address any discrepancies. The letter was developed in consultation with the Small Business Stewardship Group (SBSG) and other partners.

Members shared their experiences with nudge-type letters. A member suggested issuing such letters more broadly, as they can be timely reminders even to businesses where no discrepancies have been identified.

There is a new reporting requirement for self-assessed income tax exempt not-for-profits (NFPs). From the 2023–24 financial year, non-charitable NFPs with an active Australian business number will be required to lodge an annual NFP self-review return to notify their eligibility to an income tax exemption. Awareness communications to NFP peak bodies and tax professionals have commenced and SBSG members will receive a factsheet to share with their networks.

The ATO’s Service Delivery Group is currently consulting with staff on a restructure. The aim of this change is to move from a topic-based to a function-based structure, ensuring a more holistic client experience. Service levels for clients and tax agents will not be adversely affected.

Australian Small Business and Family Enterprise Ombudsman

Papers circulated to members prior to the meeting outlined advocacy and policy matters as well as assistance the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) provided in the March quarter.

Member discussion

Members were invited to share what they are hearing within their communities, industries and broader networks.

Small business advocates

Small business operators are exhausted, stressed, and overwhelmed. Positive ATO messaging and support can sometimes be lost amongst an avalanche of other government agency (federal and state) demands, expectations and requirements.

Economic growth appears to be centred in the large business sphere and is not being reflected within the small business community. Family businesses are increasingly relying on unpaid work from within the family to remain viable.

There is a greater reliance on ethnic and culturally based community groups and industry associations to provide reliable advice to small business owners. Small business operators are more likely to accept information from a known trusted source, rather than government agencies.

A recent small business survey (not yet published) suggests:

• over 50% of respondents considered the ATO as the federal regulator with the highest compliance burden
• 40% of respondents fear Payday Super may damage their business.

Professional associations and industry groups

Members highlighted frustration and fatigue with compliance red tape, including:

• accessing Online services for tax agents, difficulty locating correct information and downloading documents.
• time delays relating to Research and Development incentives, members noted the process is drawn out compared to previous years and waiting up to 6 months is not an incentive
• understanding legislation and the legalities that inform a liability
• Payday Super is another layer of compliance small business operators need to manage.

Economic pressures including a tight rental market have seen real estate industry members dealing with physical and verbal abuse. Some are questioning their future in the industry.

Small and independent business operators are struggling compared to large corporations within the veterinary industry and care economy. Staff shortages in rural and regional areas are an ongoing issue.

There appears to be a dilution in confidence and trust in both federal and state government bodies. Comments included:

• statements do not align with actions
• government policy needs to be ‘rural proofed’
• multi-facetted actions and expectations by numerous regulators are continuing to inundate small business, for example, industrial relations, Workcover.

Vulnerable community specialists

Comments included:

• Indigenous small business operators do not want different services, they want accessible services.
• Some vulnerable small business operators fear engaging with the ATO. Forming a safe and positive relationship is key.
• Startup businesses are commencing with low confidence of success as they are seeing established small business operators collapsing within their industry.
• Startup businesses receiving grant funding are unaware or uncertain of income tax implications. Tools and resources are needed to provide clarity.
• Instability of internet and phone coverage in rural and regional areas make it difficult to locate and obtain tax information, which is predominately provided in a digital environment.
• Financial stress has an impact on mental health.
• An increase in financial abuse is part of the recent increase in gendered violence.
• Support services are increasingly frustrated by the ongoing increase in support referrals. New records in requests for help are set monthly.
• Government agency waiting times for assistance are unacceptable.
• Government agency follow-up actions on agreed arrangements need to be transparent and timely.

Small business operators

Comments included:

• Business confidence and optimism is low, with reduced sales and increased costs, for example, rent, insurances, utilities, interest rates.
• There is no incentive to be a small business operator, with high risk and moderate reward.
• Complexities in the ATO lodgment program remain and there are too many lodgment dates.
• Some small business operators are not contributing to their own super or drawing a wage, while working longer hours to remain viable.
• Confidence in state governments is low, with state investment in infrastructure minimal.
• Government agency call centre wait times are unacceptable. People are obtaining advice and guidance through alternate platforms, usually at a cost.
• Reduced cashflow is resulting in business equipment being repaired rather than replaced.
• There is a lack of transparency when paying an employee’s super. There is no assurance funds have been received by the ATO, or an ability for the small business operator to track where the funds are at any given point in the transfer.
• Workforce shortages continue. Government needs to encourage the employment of retirees and pensioners by ensuring minimal impact on pension when working a few hours a week.
• Other workforce pressures include obtaining relevant licenses, certificates, accreditations for potential staff and the associated red tape of various federal and state government agencies.

Managing small business hardship and vulnerability

The group discussed small businesses at risk of hardship and vulnerability in the community. Comments included:

• There is a need to acknowledge the distinction between ‘financial hardship’ and ‘vulnerability’, they are related yet different. One can endure financial hardship and not be vulnerable in their personal circumstances.
• Vulnerable circumstances can include domestic abuse, financial abuse, and transferred debt.
• The ATO needs to consider both hardship and vulnerability in the implementation of internal processes and procedures and external communication methods and language used.
• In a diverse and multicultural country, how does the ATO engage, inform, educate and support in a culturally respective manner? There appears to be a disconnect between the ATO messaging of support with the level fear many in the community have regarding engaging with the ATO.
• Location (remoteness and isolation) is forcing small business operators to become reliant on a singular trusted source (a tax professional, community group, cohort) for tax and business advice. If the trusted source is negligent in their duties or inadvertently provides incorrect advice, this can leave the small business vulnerable by acting on this advice.
• The ATO needs to have greater awareness of the value industry groups and associations can provide in cascading ATO messages. The ATO should empower these groups to disseminate ATO approved support and guidance materials to industry members.
• The ATO advised that while it is committed to and will support small business in meeting reporting, lodgment and payment obligations, it is important vulnerable clients and those in hardship contact us as early as possible and make their circumstances known. There are specialised teams who can help them.
• Those in distress (mental, financial) are unlikely to admit it to themselves, their community, their network, due to pride and a fear of failure. They are more likely to battle on by not paying themselves or family than acknowledge the distress (especially with a government agency).
• The ATO needs to ensure there is a realistic expectation of payment when establishing a payment plan with a client. There is a difference in what someone agrees to pay, with what they can afford to pay.
• The ATO must ensure regular communication to the client once a debt is identified. The more a client is made aware of their debt the less likely they can ignore it. Simply putting information on myGov is not useful as it requires the client to seek it out.
• Tax agents should be included in the support and communication process. Currently, agents are not notified and need to search on an individual client basis. There needs to be a consolidated communication (via Online services for agents) advising a tax agent of communications circulated to clients within their client base.
• Other support networks and trusted advisers (that is, industry associations, bookkeepers, and community groups) should be involved in the support and communication process. The client is more likely to accept ATO support when people they trust are included.

The ATO will schedule another out-of-session deep dive discussion of this topic.

Understanding and dealing with small business tax risks

The ATO shared its three-tier risk model with members. The ATO sought feedback on whether the framework makes sense to an external audience and if there is value in sharing it more widely within the community.

Three lenses (organisational, stewardship and client experience) analyse a client’s experience which helps the ATO to understand and manage tax compliance. The ATO undertakes environmental scans of the client experience to identify existing or potential risk issues and areas of caution.

After the environmental scan, the client experience is analysed through 4 pillars (registration, lodgment, correct reporting, and payment) to understand and identify risks. The three-tier risk model (tier 1 - behaviour, tier 2 - characteristics, and tier 3 - specific characteristics) looks at the client’s behaviour as it is aligned to the 4 pillars.

Based on the identified behaviour, an ATO response will be tailored to an individual client and will be on a risk-tolerance spectrum ranging from low-touch (support and educate), mid-touch (balancing prevention and correction activities) and high-touch (applying the strongest possible action to detect and deter).

Member comments

A judgement element is required as from a risk perspective, data can only do so much. Confirmation data will identify a client hypothesis for which ATO staff will apply judgement.

The framework takes a holistic client view enabling connections across various ATO business areas, for example Lodge and Pay, Superannuation, and GST, to align strategies and client engagement.

The framework needs to be aware and delineate where a business is non-compliant due to the struggle to remain viable and where the non-compliance is more deliberate. This view aligns with the group's discussion on hardship and vulnerability.

Members questioned how the framework can be used to give confidence within the community and whether it can provide affirmation where a client is doing the right thing.

The ATO will distribute a questionnaire to members to obtain additional insights on this initiative.

Sharing Economy Reporting Regime

The ATO provided an update on the second tranche of the third-party Sharing Economy Reporting Regime (SERR).

Under SERR, Electronic Distribution Platform (EDP) operators need to report supply of services facilitated through their platform to the ATO biannually.

Tranche 1 considered EDP reporting transactions related to a supply of taxi service (including ride-sourcing) or short-term accommodation. Tranche 2 will include reportable transactions for all other industries.

The ATO invited members to raise awareness of the regime and sought support in identifying EDPs and their sellers to enable the ATO to engage them with prior to 1 July 2024 (the start of the Tranche 2 reporting period).

Member comments

Members questioned whether there are online tools to assist operators understand if the SERR is applicable to their circumstances, and if there are any exemptions that are listed.

Members noted that outside of the SBSG, they have not received communications via their existing natural systems that Tranche 2 is coming.

The ATO will share the explanatory statement on legislative arrangements and related web content once it is published.

Marketing and communication

The ATO’s marketing communications branch is undertaking a comprehensive research project on small business communication and channel preferences.

The research is focused on identifying how small businesses prefer to access and receive business information generally, and how they prefer to receive specific information about their tax, super and registry affairs.

The research will be used to improve and/or expand existing channels and identify new channels that will have greater reach to our intended audience.

The research report will be finalised by the 30 June 2024 and a companion research project on generational differences is expected to be completed in August. The projects will provide insight into the differences age makes to communication preferences for tax, super and registry information.

The research report results will be tabled for discussion at a future SBSG meeting.

Member comments

Co-chair Bruce Billson advised ASBFEO has undertaken research on community dimensions, including age and gender which can be shared with the ATO.

Attendees

Attendee list

Organisation	Member
ATO	Will Day (Co-chair), Small Business
ATO	Andrew Watson, Individuals and Intermediaries
ATO	Emma Rosenzweig, Superannuation and Employer Obligations
ATO	Emma Tobias, Small Business
ATO	Karen Foat, Australian Business Registry Services
Australian Chamber of Commerce and Industry	Samantha McKenna
Australian Small Business and Family Enterprise Ombudsman	Bruce Billson (Co-chair)
Australian Veterinary Association	Moss Siddle
Chartered Accountants Australia and New Zealand	Susan Franks
Council of Small Business Organisations Australia	Luke Achterstraat
Direct Selling Association of Australia	Adele Sutton
Indigenous Business Australia	Kellie Hind
Institute of Certified Bookkeepers	Matthew Addison
Institute of Public Accountants	Tony Greco
Real Estate Institute of Australia	Jock Kreitals
Restaurant and Catering Association	Chris Alchian
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	Shannon Smit
Small Business Operator	Tony Sama
Supply Nation	Kate Russell
Treasury	Bede Fraser
Treasury	Kylie Bourke
UNSW Tax & Business Advisory Clinic	Ann Kayis-Kumar

Guests

Guest attendee list

Organisation	Attendee
ATO	Adam O'Grady, Lodge and Pay
ATO	Alison Cone, ATO Corporate
ATO	Anthony Marvello, Small Business
ATO	Claire Miller, Enterprise Solutions and Technology
ATO	Dan Ralph, Small Business
ATO	Darryl McCarthy, International Support and Programs
ATO	Dale Adams, Small Business
ATO	Kath Philp, ATO Corporate
ATO	Michael Morton, Small Business
ATO	Vanessa Kelly, Small Business
ATO	Travis Deane, ATO Corporate

Apologies

Apologies list

Organisation	Member
ATO	Elissa Walker, Enterprise Solutions and Technology
ATO	Jill Kitto, Lodge and Pay
Australian Automotive Aftermarket Association	Lesley Yates
Australian Retailers Association	Jason Robertson
Indigenous Business Australia	Greg Ellis
Restaurant and Catering Industry Association	Suresh Manickam
Treasury	Anthony Seebach