Key topics discussed at the Small Business Stewardship Group meeting 2 November 2022
Agency updates
ATO
The ATO has issued a second round of awareness letters under the Director penalty notice and Disclosure of business tax debt campaigns. All businesses that meet the criteria for the disclosure of business tax debts have now received one of these letters. One in 3 of these businesses no longer satisfy the conditions for disclosure of their business tax debt, primarily because they have established a payment plan. A system solution will be fully operational in early 2023, which will streamline the process for issuing notices of intent to disclose business tax debt. This will enable us to issue the notices in a timelier manner as soon as a business meets the criteria.
The finalised Taxation Ruling on personal services income (PSI), which has been designed to address concerns that the PSI rules are difficult to understand and apply, will be published in November 2022. It incorporates feedback from consultation. The updated ruling is the first step in an education phase, with updated web content and other advice and guidance packages being developed as part of this phase over the next 12 months.
The ATO has updated web content in relation to commercial rent or lease payment changes. Fact sheets have been created to help tenants and landlords understand tax implications for waived or deferred rent. The ATO provided information to members out of session for sharing with networks.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
The Ombudsman is working with the ATO to raise awareness of the Tax Concierge ServiceExternal Link for small business.
As part of the October Budget, the My Business Future program funding previously announced in the March Budget has been partially redirected to support extensions to mental health and financial counselling initiatives. The Ombudsman will look for opportunities to support building financial acumen, such as through the ATO’s cash flow coaching kit.
Treasury
The Skills and Training BoostExternal Link and Technology Investment BoostExternal Link measures announced in the 2022–23 March Budget are proceeding. The government is currently considering submissions made as part of consultation on the exposure draft legislation.
Open consultation relevant to small business includes Strengthening the ABN systemExternal Link, Measuring what mattersExternal Link and the Employment White PaperExternal Link.
Extensions to financial counselling and mental health programs for small businesses were announced in the 2022–23 October Budget.
A statutory review into the Payment Times Reporting Act 2020 is scheduled for the first half of 2023 to assess the efficacy of the Payment Times Reporting SchemeExternal Link. The review will include public consultation and submissions from small business representatives; feedback from associations will be welcome.
Member comments
- There is commentary in the small business community about instances where the ATO has offset current refunds against a future tax payment impacting cash flow. The ATO agreed to investigate this as it is not our intent to do this.
- Members encouraged the ATO to engage with the Australian Banking Association when there is an increase in debt awareness activities.
- Members observed that all ATO letters have a similar look so targeted letters may not be achieving the desired impact.
Post-meeting update – The ATO shared the suite of Disclosure of business tax debt awareness letters with members on 4 November for information and feedback.
- Members questioned the Taxpayers' Charter review, highlighting that given it has a taxpayer lens, there should be a level of independence to the process. The ATO confirmed that Treasury are involved in the review and all submissions received will be made publicly available. The ATO agreed to pass the feedback onto the review team and will provide the group with more information on how the process will be made transparent.
Member discussion
Discussion focused on reviewing the operation of the Small Business Stewardship Group (SBSG) and looking towards 2023. Members provided feedback on whether we are focused on the right topics.
- Members agree that agendas and meeting papers are done well. Each agenda item has a clearly defined purpose with focus questions for discussion, which helps to engage with each topic.
- Given the diversity of small business and the wide variety of topics, the group feels discussions can skim over the top, instead of deep diving into issues. Members would like to find a balance between the breadth of issues and the depth in which the SBSG can explore issues.
- Potential deep dive topics include small business compliance focus, shadow economy, dispute mechanisms, debt recovery, cash flow and profitability, repositioning the small business narrative, digitisation, red tape reduction and cyber security.
- Members suggested that ATO communications could be improved by adding case studies or testimonials to help explain the technical content.
- Sharing the direct outcomes of SBSG consultation with the group is valuable.
- Members will be approached out-of-session to confirm priority topics for inclusion in the 2023 meeting schedule. As part of this process, the secretariat will consider options for scheduling opt in deep-dive sessions in addition to the quarterly meetings.
Small Business audit and objection pipeline and alternative dispute resolution services
Of the 4.2 million small businesses in Australia, only a small number (less than 1%) are subject to an audit each year. An even smaller subset will dispute their assessments through the objection process.
The small business market is diverse and the ATO takes a tailored approach towards dispute resolution, focusing on specific needs and circumstances of the taxpayer. This includes providing support services during an audit to prevent disputes from arising or escalating using our independent review for small businesses, in-house facilitation and where appropriate Dispute Assist for unrepresented small businesses.
The ATO is developing a communication campaign to raise awareness of the ATO’s alternative dispute resolution services for individuals, small business, and representatives, and would like feedback from members on how to ensure the campaign reaches the correct audience.
Member comments
- Members observed there is an inconsistency in the timeframe taxpayers have to provide information to inform audit and objection processes in comparison to the time it takes for the ATO to finalise outcomes.
- The best time to communicate objection rights and dispute resolution pathways is when a taxpayer is first informed about an audit. Case studies or testimonials would help taxpayers understand the process and potentially influence their decision to explore a resolution pathway.
- Members expressed interest in a deep-dive on ATO dispute mechanisms and resolution pathways in 2023.
Sole traders and micro enterprises
Sole traders and micro enterprises represent a large portion of the small business population; however, they are unique in the challenges they face and how they navigate the tax and superannuation systems.
The ATO is working to better understand this population and identify opportunities to provide more tailored support. To inform this work, we are seeking feedback and insights from members to help shape the future experience.
Member comments
- Sole traders and micro enterprise are under-resourced, time-poor and tax is not their number one priority. Their preference is for interactions with the ATO to be as seamless as possible.
- The current pay as you go instalment system is full of red tape and difficult to navigate between personal and business.
- Account administration is difficult with different accounts for income tax and activity statements and unique BPAY numbers that change with every lodgment. The volume of paperwork and variation in due dates adds to the red tape.
- Many small businesses use digital systems (smart phones, tablets) to conduct business but there is no integration of applications.
- There is a disproportionate cost that small business incurs to comply with the tax system compared to larger businesses.
- Small amounts of debt per entity over a large population adds up to a large number. The small business debt narrative needs to be repositioned.
- Members expressed interest in continuing this discussion as a deep-dive topic in 2023.
International examples of OECD Tax Administration 3.0
At the Xerocon conference in September, the Commissioner of Taxation proposed a future digital tax system ‘where tax just happens’.
The Commissioner emphasised the principle of leveraging natural systems and spoke of the ‘North Star’, which is aligned with the OECD’s Tax Administration 3.0, where reporting, payment and real-time compliance checks coincide with a taxable event.
The ATO has looked at how other tax authorities are approaching digitalisation of small business taxation and see a broad range of approaches that are influenced by community culture, degrees of digitisation and existing laws and frameworks.
In designing a roadmap for Australia, consideration need to be given to what best aligns with the current Australian small business ecosystem, history and culture.
Member comments
- Quality data is an important consideration for any digital system.
- There will be a long cultural development journey to achieve the vision.
Other business
Co-chairs Will Day and Bruce Billson thanked members and the secretariat for their contribution in 2022.
Attendees
Organisation |
Member |
|---|---|
ATO |
Will Day (Co-chair), Small Business |
ATO |
Emma Tobias, Small Business |
ATO |
Hoa Wood, Individuals and Intermediaries |
ATO |
Karen Foat, Australian Business Registry Services |
ATO |
Vivek Chaudhary, Debt and Lodgment |
Australian Chamber of Commerce and Industry |
Natalie Heazlewood |
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 |
John Todd |
Chartered Accountants Australia and New Zealand |
Susan Franks |
Council of Small Business Organisations Australia |
Alexi Boyd |
Direct Selling Association of Australia Inc |
Adele Sutton |
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 |
Small business operator |
Paul Meissner |
Small business operator |
Tony Sama |
Treasury |
Bede Fraser |
Treasury |
Peter Cully |
Guest attendees
Organisation |
Attendee |
|---|---|
ATO |
Andrew Watson, Small Business |
ATO |
Bianca Armytage, ATO Corporate |
ATO |
Claire O'Neil, Lodge and Pay |
ATO |
Emma Butler, Small Business |
ATO |
Farisha Ali, Objections and Review |
ATO |
Kelly Norwood, Small Business |
ATO |
Larissa Jones-Angel, ATO Corporate |
ATO |
Peta Lonergan, Superannuation and Employer Obligations |
ATO |
Richard Mold, Objections and Review |
ATO |
Rowan Fox, Lodge and Pay |
ATO |
Scott McWhirter, Small Business |
ATO |
Tony Goding, Small Business |
Apologies
Organisation |
Member |
|---|---|
ATO |
Emma Rosenzweig, Superannuation and Employer Obligations |
Australian Lottery and Newsagents Association |
Michael Renshaw |
Restaurant and Catering Industry Association |
Hugo Robinson |
Small business operator |
Deborah Cook |