Small Business Stewardship Group key messages 6 March 2024

Setting the scene

SBSG in 2024

The ATO provided an overview of the Small Business Stewardship Group's (SBSG) purpose, intent, and the roles and responsibilities for 2024, and referenced core SBSG artifacts including the SBSG charter.

Members sought clarification on the definition of small business and the calculation of small business figures referenced within the readings, which the ATO agreed to provide.

Meet and greet

Members were invited to share their reasons for becoming an SBSG member and what they would like the group to achieve. Members noted SBSG membership provides the opportunity to:

• make a meaningful difference to help businesses stay in business and keep employees through challenging times
• be a conduit of information between the ATO and small business networks
• see the diversity of small business ecosystems, whilst acknowledging the commonality of challenges and issues small business face
• encourage reflections and adjustment to ATO practices, approach, and messaging where appropriate
• assist with ATO communications and messaging to reduce small business uncertainty
• share insights with the ATO of community issues; fundamental infrastructure problems (limited internet access in remote areas) do not support small business’ ability to adopt the ATO's preferred engagement strategies.

ATO Second Commissioner, Jeremy Hirschhorn thanked members for the role they play and highlighted the importance of stewardship. He acknowledged the integral role small businesses play in the Australian economy. The ATO's primary driver is to make it easier for small businesses to meet tax and superannuation obligations, while ensuring a level playing field by taking appropriate action against unscrupulous small business competitors.

Member comments

Members were invited to ask questions or raise concerns. Comments included:

• The law does not always provide the ATO with discretion as to how it should be administered; consequently, ATO action is not always proportional to the small business behaviour. This results in a perception of unfairness when considering the compliant history of the small business or the individual circumstances of the client which may include, domestic violence, coercion, or mental health issues.
• Flexibility and choice can create its own red tape; variation in lodgment dates can create non-compliance due to confusion rather than intent.
• We should not assume a small business owner knows they are a small business. There are vulnerable community members who are exploited and coerced into the role of director without understanding the consequences.
• The ATO must ensure its long-term vision is not undermined by its current activities. Concepts of streamlining processes and using a small business’ natural business systems to ensure adherence to tax and super obligations are positive. However, there is a perception that some current ATO initiatives do not align with this vision.
• Where there is a tax debt, an assessment needs to be made as to whether the best course of action for the long-term survival of a small business is to educate or penalise.

Members were also asked to share their insights on key themes they would like the SBSG to explore in 2024. These included:

• hardship, which includes importance of underlying infrastructure and community support
• education and knowledge, and ensuring a balance between supporting and enforcing
• digital infrastructure
• streamlining and timing of payment/lodgment dates
• the use of natural business systems
• Payday Super
• the limitations of the law
• ATO narrative; tone, language and the framing thereof in ATO messaging.

Improve small business tax performance

The ATO introduced one of its key focus areas, the Improve small business tax performance initiative, in preparation for a deep dive discussion with members later this financial year. The initiative focuses on opportunities to build a digital-first tax ecosystem to help small businesses comply with their tax and super obligations by integrating ATO systems with the natural systems of their businesses. Over the last 12 months, the following concepts have been tested via pilots:

• Will more frequent GST payments assist small business operators to better manage cashflow and prevent new debt through using digital services to facilitate more regular GST payments?
• Will monthly GST and pay as you go withholding (PAYGW) reporting (rather than quarterly) assist small businesses better provision for their GST and PAYGW obligations, improving their cashflow management and preventing new debt?
• Does digitalising and embedding ATO public advice and guidance into digital software solutions support early detection and correction of potential issues or errors?

Insights from pilots and engaging with stakeholders such as the SBSG will assist in shaping what the tax system looks like for small business in 2030 and beyond. The ATO acknowledges there is not a single solution and flexibility is required to reflect the diversity within small businesses and their respective ecosystems.

Member comments

• Members commented on the role of intermediaries and designing the future tax system so the intermediary provides an assurance role.
• Increasing the frequency of reporting/payment cycles (monthly verses quarterly) could be beneficial to a small business, especially at start-up and for cash flow purposes. Members noted more regular touchpoints with the ATO in the first 12 to 18 months could ease future pain points and help ingrain good business practice. Incentives could be offered to increase the frequency of reporting as a reward for good behaviour where they have been compliant.
• Members noted that, for other small businesses, an increase in frequency is perceived as increased tax and super activity, resulting in potential additional compliance costs. There is no one size fits all approach and consideration of the uniqueness of each small business ecosystem is required.

An out of session deep dive discussion on this topic will be arranged.

Addressing small business collectable debt

The ATO acknowledges most small businesses meet their tax and super obligations on time with little or no ATO intervention. However, it is recognised that the current economic climate is placing pressure on the ability of some small businesses to meet their obligations, particularly where debts have accumulated over time and are now aged.

The ATO is committed to improving debt collection outcomes, which includes helping viable businesses stay on track. The ATO is focused on shifting community expectations and payment culture by re-establishing certainty of ATO debt recovery actions that enforce the timely payment of tax and super.

The ATO sought member guidance on appropriate communication and messaging to ensure positive engagement with the small business community.

Member comments

• Members understand the challenge for the ATO to recover debt and appreciate the notion of differentiation of recovery action for legacy debt (debt pertaining to a specific event or period, such as COVID-19) and new debt. There will be a segment of the small business community not making payments if they perceive there is no consequence.
• When considering an outstanding debt, the ATO should also consider the distinction between financial hardship and vulnerable circumstances. The ATO should be mindful of this distinction in its messaging.
• Consistency is key – regardless of who someone has spoken to in the ATO call centre, the information provided needs to be clear and consistent.
• The ATO must ensure discretion is exercised by considering the small business’ compliance history, that is 'do not punish those with a good track record'.
• ATO communications and messaging need to make it clear that by entering a payment plan, the taxpayer has committed to making payment and not a statement of intent to make payment.
• Regarding the consideration of payment plans within the financial sector, some members in the mortgage broking sector are not seeing tax debt or payment plans being an impediment to lending money.

Agency updates

ATO

The record-keeping direction to educate is live. Taxpayers can be given the option to undertake an approved record-keeping course as an alternative to a penalty where the ATO identifies an issue pertaining to their tax and super records.

Consultation is continuing to identify and prepare for the second phase, or Tranche 2 of the third-party Sharing Economy Reporting Regime. Additional information will be circulated to members soon.

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.

The ATO advised a range of communication channels will be used to increase awareness once the bill receives Royal Assent. The ATO will work with members on messaging to ensure certainty within the community as to what is required.

Australian Small Business and Family Enterprise Ombudsman

Members were reminded of the Tax Concierge Service which provides support to small businesses seeking a resolution to disputes, objections and appeals to ATO decisions.

Other business

In response to member interest, the ATO will provide further information on its position following a recent High Court decision which dealt with the distinction between employees and independent contractors.

Attendees

Guests

Apologies