Key topics discussed at the Small Business Stewardship Group meeting 30 August 2022
Agency updates
ATO
The ATO continues to undertake visible enforcement activity through Operation Protego to investigate and address fraud behaviour, involving individuals inventing fake businesses to claim false GST refunds. The activity highlights the need to strengthen safeguards to prevent fraud attacks in the future.
The final Taxation Ruling on personal services income (PSI) will be published in September 2022. The ruling incorporates feedback from the public and targeted consultation. Web content will be developed and released in parallel with the ruling to support education and understanding.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
General business challenges continue and there is ongoing distress in the small business community. Sectorial changes are being observed with a significant component of insolvency numbers related to the building industry.
Australian businesses have until 20 September 2022 to reserve shorter .au domain namesExternal Link before they become available to the public. The level of awareness is minimal, and the Ombudsman issued a media releaseExternal Link urging small business to take action to safeguard their brand.
Access to appropriate insurance continues to be an issue and the ABSFEO is advocating for a discretionary mutual fund where the insurance market is not working as intended.
The SB Tax Concierge ServiceExternal Link provides access to legal advice to help small business appeal ATO decisions. This service option lacks visibility and the ABSFEO is seeking a policy variation to utilise administered funds to raise awareness of the service.
Treasury
Treasury has released an issues paperExternal Link for the Job and Skills SummitExternal Link. A white paper will be developed subsequent to the summit.
Stakeholders have been invited to provide the government with views and information ahead of the October Budget. Views do not need to be in the form of a formal submission.
Legislation has been introduced before parliament to give effect to the government’s election commitment on the fringe benefit tax exemption component of the Electric Car DiscountExternal Link.
The Payment Times Reporting RegulatorExternal Link released an update on the Payment Times Reporting SchemeExternal Link. The majority of reports submitted indicate that entities were not meeting their own payment terms offered to small business. Guidance has been released for large firms to help them comply with the payment times reporting scheme.
The Franchising Disclosure RegisterExternal Link was launched in April 2022 and, under franchising code reforms, requires franchisors to disclose information about their franchising system by 14 November 2022.
The government has announcedExternal Link the introduction of legislation to strengthen unfair contract terms protectionsExternal Link for small businesses and consumers.
Consumer Data RightExternal Link (CDR) continues being rolled out across a number of sectors. The 4 major banks have already enabled data sharing through CDR for business consumers. Non-major banks are required to commence data sharing from 1 November 2022 and major energy retailers from 15 November 2022. Treasury will commence consulting on draft rules and standards for the telecommunications sector.
On 27 July 2022, the government introduced a legislative amendmentExternal Link to delay the commencement date of supporting legislation for the Modernising Business Registers program to 1 July 2026.
On 7 July 2022, the government announced Treasury would review Your Future, Your Super reformsExternal Link. The review will consider whether there have been unintended outcomes as a result of the reforms. Treasury will conduct public consultation as part of the review.
Member comments
- Members support and encourage ASBFEO’s work on insurance, citing it is big picture thinking. Changes are required to determine appropriate settings for the Australian environment.
- The importance of shortened domain names is likely to vary amongst small businesses.
- Members discussed CDR, noting strong collaboration between associations and Treasury over the years has helped reduce red tape and the effect on Small Business. It was acknowledged the journey is not yet over and the door must stay open for ongoing active consultation. Members also observed the promise of CDR has not yet materialised for small businesses and user cases are required to demonstrate the benefits.
- Members suggested the Your Super, Your Future review consider the stapled fund process, given current legislation and administration are causing problems with onboarding new employees.
Member discussion
- Labour and skill shortages continue to be the main issue affecting small business. Immediate action or reform to alleviate the pressure is welcome.
- Some businesses are considering ways to fill the workforce gap through technology and innovation.
- The increased cost of running a business, ongoing supply chain issues, inflation, and rent increases are all contributing to a general loss of confidence among small businesses.
- Cash flow is an emerging issue due to increased costs impacting profitability. Members suggested understanding the future impact of tax payments could help manage cash flow planning.
- Businesses are not confident about pricing in an inflationary world. Financial and debt advisers are increasingly being engaged as an intermediary to support businesses to stay viable.
- Tax professionals are seeing an increase in ATO debt collection activities and have reported significant delays obtaining ABNs.
- Tax professionals continue providing mental health support to clients that have been devastated by natural disasters. This is also affecting tax professional members.
- Paying tax on COVID-19 support payments is emerging as a pain point for the direct selling industry. Unwelcome rhetoric about the gig economy in the media has also caused concerns.
- The Motor Trades industry continues experiencing supply chain issues. The large scale of job vacancies is also contributing to long waits for motor vehicle services and repairs.
- The Veterinary industry continues experiencing worker shortages. These shortages are being compounded by a high graduate attrition rate and the number of experienced vets leaving the profession to have families or due to burn-out. Rising business and wage costs are causing many independent operators to sell their business to larger corporates – mirroring trends in the Pharmacy and Optometry industries.
- There are concerns around the new PSI ruling being developed and how this will affect sole traders and company structures.
Small Business Lodge and Pay engagement approach
The ATO has been progressively increasing normal levels of debt collection and running awareness campaigns that focus on disengaged clients. Specifically:
- Disclosure of business tax debts: Under this measure, as at the end of August, the ATO has issued nearly 30,000 awareness letters to clients who are not actively managing debts greater than $100,000 and where their debt is overdue by 90 days. From July 2022, disclosure to Credit Reporting Bureaus includes sole trader, partnership, and trusts debt information.
- Director penalty notices: the ATO has issued more than 52,000 letters to director’ whose companies have not met their debt obligations in respect of pay as you go withholding, Superannuation Guarantee Charge and GST.
To date, there has been a positive response, with many clients making appropriate payment plans to avoid disclosure of tax debts or Director penalty notice action and a significant number of debts being paid in full. Complaint levels associated with firmer debt action have been lower than anticipated.
In June 2022, the ATO recommenced offsetting of debts on hold. Affected clients and their representatives were contacted throughout May 2022, to remind them of their aged debt and advising credits may be offset. Approximately 15% of clients contacted through this engagement came forward to pay their debt upfront.
Insolvency numbers are beginning to return to pre-pandemic levels. There has been an increase in the number of small business restructuring proposals, with the number of proposals received in the last 3 months equalling the numbers received over the last 18 months.
The ATO’s approach continues to be one of transparency, ensuring clients are aware of their obligations, how the ATO can support them with their tax if they are experiencing challenges, and encouraging clients to engage with their tax professional or with us as early as possible.
Member comments
- The lack of visibility of debts on hold on Online services for agents makes it difficult for tax professionals to have appropriate conversations with clients to help inform their tax planning.
Post meeting update – Debts on hold are visible as a transaction in a client’s statement of account in Online services. See View a debit on hold transaction in ATO Online for how to search for these transactions.
- Members questioned whether parameters for debt awareness campaigns included clients with a pre-COVID-19 debt only. The ATO confirmed this parameter has been removed.
- Members provided positive feedback on the ATO’s approach to granting payment plans and quick processing of lodgment deferrals.
- It was noted that many clients fall into a pattern of making payment arrangements they cannot keep. The ATO should consider ‘busting myths’ about payment plans and providing more guidance for clients about acceptable parameters for payment plans, while ensuring the online payment arrangement provision is not misused.
Small Business Future Vision
The ATO is working to improve small business tax performance through making better use of data and digital services, and working with our partners in the tax system.
The Small Business Future Vision is a program of work that will explore ways that challenge the current status quo to assist in addressing tax problems, and acknowledge evolving business models and digitisation of the economy, so tax assurance occurs in real time.
Our future approach considers 3 focus areas:
- Assurance built into the tax and digital eco-system
- Incentives to join a permission-based tax digital eco-system
- Integrity controls for bad and opportunistic actors
The approach is closely aligned to OECD Tax administration 3.0External Link
Member comments
- Tax assurance is a combination of people and processes enabled by technology, rather than technology solving everything.
- Red tape reduction effectiveness is important to demonstrating the benefits of digitalisation. The ATO agreed to share information on Single Touch Payroll (STP) red tape reduction to demonstrate positive outcomes for small business.
- The strategy could benefit from an outward looking approach
- Consider flattening the cost of compliance across markets (small business versus large corporates).
- Find ways to remove ‘future tax owed’ through technology solutions at point of sale or other natural systems.
- Strengthen affirmation and acknowledgement incentives for small businesses who are doing the right thing.
STP Phase 2
Implementation
Digital service providers (DSP) are tracking well with product readiness and supporting their customers transition for STP Phase 2 reporting.
The ATO is working closely with DSPs to make informed decisions about transition timeframes. Employers requiring a delayed transition to STP Phase 2 reporting can apply through an online tool in ATO Online services for business.
Over the last 12–18 months, the ATO has developed and published a comprehensive suite of resources to help employers and their agents understand STP Phase 2 changes.
Superannuation guarantee
Important changes to how much superannuation an employer needs to pay on behalf of their employees, took effect from 1 July 2022.
These superannuation guarantee (SG) changes have received good media attention. The ATO thanked Small Business Stewardship Group members for their help communicating changes within their respective networks.
A frequently asked question relates to how much SG should be calculated in a scenario where work is undertaken in June, but the employee was paid in July and the SG contribution reported in August. In this scenario, employers are required to work out the SG entitlement on the day the employee is paid.
Ongoing awareness of SG changes is required to ensure employers pay super contributions on time and in full to the correct super fund, to avoid being liable for the super guarantee charge (SGC). The Commissioner of Taxation has no discretion in relation to the SGC and can only exercise discretion in relation to remission of Part 7 penalties
The ATO’s compliance program has a strong focus on prevention, help and education. The ATO reviews all complaints received and initiates risk-based compliance cases focused on egregious behaviour where employers are deliberately not paying their employees.
Member comments
- There is apprehension in the small business community about transitioning to STP Phase 2 by 31 December 2022. A member suggested the ATO adopt a flexible approach to the transition.
- Given recent SG changes and the ATO approach to debt, employers are concerned about being penalised for making mistakes.
- Members suggested ongoing communication of SG changes was crucial, particularly for industries with a seasonal workforce.
Other business
Gillian Stapleton, Direct Selling Australia, announced her resignation from the group. Co-chairs Will Day and Bruce Billson thanked Gillian for her contributions and wished her well for the future.
Attendees
|
Organisation |
Member |
|---|---|
|
ATO |
Will Day (Co-chair), Small Business |
|
ATO |
Emma Rosenzweig, Superannuation and Employer Obligations |
|
ATO |
Karen Foat, Australian Business Registry Services |
|
ATO |
Andrew Watson, Small Business |
|
ATO |
Vivek Chaudhary, Debt and Lodgment |
|
ATO |
Bianca Armytage, ATO Corporate |
|
ATO |
Thomas O’Byrne, ATO Corporate |
|
ATO |
Anthony Marvello, Small Business |
|
Australian Chamber of Commerce and Industry |
Natalie Heazlewood |
|
Australian Lottery and Newsagents Association |
Michael Renshaw |
|
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 |
Gillian Stapleton |
|
Institute of Certified Bookkeepers |
Matthew Addison |
|
Motor Trades Association of Australia |
Richard Dudley |
|
Real Estate Institute of Australia |
Jock Kreitals |
|
Small business operator |
Deborah Cook |
|
Small business operator |
Paul Meissner |
|
Small business operator |
Tony Sama |
|
Treasury |
Bede Fraser |
|
Treasury |
Peter Cully |
Guest attendees
|
Organisation |
Attendee |
|---|---|
|
ATO |
Carolynne McQuay, Individuals and Intermediaries |
|
ATO |
Rowan Fox, Lodge and Pay |
|
ATO |
Kelly Norwood, Small Business |
|
ATO |
Larissa Jones-Angel, ATO Corporate |
Apologies
|
Organisation |
Member |
|---|---|
|
Indigenous Business Australia |
Greg Ellis |
|
Treasury |
Peter Cully |