Small Business Stewardship Group key messages 9 August 2023

Lodge and pay

Many small business operators succeed in meeting their tax and super obligations - approximately 69% of the tax paid by small business is paid on time with little or no ATO intervention.

At the same time, the ATO has noticed a growing number of small businesses who have the capacity to pay are waiting for the ATO to pursue debts before paying or are entering payment plans rather than paying in full.

Despite the ATO resuming firmer and stronger debt recovery actions following a sustained pause during COVID-19, businesses are de-prioritising the payment of ATO debts.

The collectable debt book as of 30 June 2023 is about $50.2 billion. Most of this is self-reported by businesses, many of which have capacity to pay but are choosing not to.

Restoring and maintaining Australia’s voluntary tax and super payment system requires a shift in the ATO’s approach to payment.

Paying tax debt is not optional. The community expects the ATO to ensure everyone pays their fair share. The ATO will be firm but fair, helping those who genuinely need it, while addressing the unfair financial advantage gained by those who deliberately don’t pay.

Members discussed how the ATO can engage and communicate with small business clients to ensure transparency provide a clear view on what to expect.

Members' comments

Members questioned the level of unpaid debt in the Privately Owned and Wealthy Group (POWG) market segment. The ATO advised the debt in this segment sits at the lower end of the market, where businesses are more aligned to small business. The ATO expects to see less payment opportunity in this segment and more likely exits, insolvencies.

Members questioned the use of the language ‘wealthy’ when defining market segments and whether it is helpful when discussing unpaid business debt. The ATO clarified that the POWG definition is factually based on market turnover but agreed the language may not resonate. We will consider providing appropriate context in external messaging.

Members requested industry or sectorial breakdowns be provided to facilitate a ‘call to action’ for respective industries. The ATO will provide a breakdown of the debt book via industry and follow up directly with the association. The ATO will also provide an updated pack outlining the break-up of the small business debt book out of session under confidence, to allow members to consider and share insights.

Members noted media in recent weeks relating to ATO debt collection. The ATO confirmed recent media commentary aligns to the ATO corporate plan launch. The corporate plan includes a focus area on addressing collectable debt.

Discussion was held on the total value of unpaid debt with members noting the narrative needs to be clear when communicating with the community. Members questioned whether uncollectable debts are visible on online services. The ATO confirmed uncollectable debt includes disputed and insolvent debt which are visible online. Debts on hold are also excluded from the $50 billion collectable debt book and work is on track to ensure they will be visible from December 2023. The ATO acknowledged the importance of visibility for all debts.

Members questioned how the ATO distinguishes between businesses that are capable but unwilling to pay and those that don't have capacity. The ATO can analyse the financial resilience of a business, including a comparison with their nearest neighbour as a starting point for discussion, noting it does not provide the full picture. Analysis suggests approximately half of unpaid debt is owed by businesses that are showing financial resilience.

Members noted the ATO will need to be on the front foot describing what the change in posture means, allow for the possibility of unknowns (such as mental health), and provide scope for taxpayers to come back and present a more detailed picture based on their circumstances.

The ATO assured members it is mindful of and focused on preventing adverse impacts for vulnerable clients. Consideration will also be given to providing help and support for businesses that can ‘turn around’ and allowing businesses that are no longer viable to exit gracefully.

Members discussed the impact on payment plans and what it means for clients and advisers if the ATO doesn’t agree to a payment plan proposal. The group agreed we do not want to inadvertently create a closed door. Further discussions will take place out of session to understand how to navigate this issue for clients and advisers.

Members offered to provide out of session feedback to the ATO on how to manage the shift in posture for vulnerable clients. Members will also share experiences with payment plans.

Payday Super

Employers will be required to pay their employees’ super guarantee at the same time as their salary and wages from 1 July 2026 (Payday Super measure).

The measure will enable more timely identification of mistakes, errors, and non-compliance, helping the ATO engage with employers and get them back on track.

The ATO is developing options for the administration of the measure to provide the government and is consulting and co-designing with all stakeholder groups. The ATO is focused on the administrative aspects of the measure, impacts on stakeholders, and any changes that need to be made.

Treasury is leading separate consultation on the policy implementation of the measure and will release a consultation paper soon.

The ATO is coordinating with Treasury on consultation to inform both the administrative design and policy and develop workable solutions for external stakeholders.

The ATO provided an overview of the co-design principles, consultation with existing stakeholder groups to date, and feedback and learnings from these engagements.

The project team welcomes input from individuals and other parties and can be contacted at paydaysuper@ato.gov.au

Members' comments

Members responded positively to the intent of Payday Super and noted opportunities to improve cash flow and reduce administrative imposts. Payday Super may help small businesses to avoid accumulating unpaid super guarantee liabilities.

Members agreed with points raised on the digitalisation and streamlining of reporting and payments to reduce administrative burden, mistakes, and errors. Setting up and navigating multiple systems for funds and clearing houses will be a major irritant for businesses without accounting software that can automate super payments.

Members raised concerns about the digital capability of some smaller businesses and asked about potential exemptions from Payday Super reporting and payment obligations. The ATO advised that while the current position is there will be no exemptions for Payday Super, these issues can be raised through the ongoing consultation process.

Members discussed compliance aspects of Payday Super noting the current regime is not fit for purpose. Members agreed that employers should not be penalised for issues outside of their control, including:

• employees not providing accurate and timely fund nominations
• payment processing times by financial institutions, funds and clearing houses
• timeliness of payments being returned to the employer for reprocessing if an error is made.

Members suggested that the ATO should differentiate between honest mistakes and deliberate non-compliance as part of any new compliance regime.

New small business support offerings

The ATO, in partnership with the Department of Industry Science and Resources, has developed new cash flow coaching resources for small businesses and their trusted advisers to complement and expand the existing suite of Cash Flow Coaching Kit education products.

The new resources have been developed to help small businesses understand and manage their cash flow, and support conversations with trusted advisers and the ATO. The resources are available on business.gov.au, a whole-of-government website for the Australian business community.

Small businesses have highlighted their desire to access information and educate themselves at a time that is convenient for them. As such, Essentials to strengthen your small business has been developed encasing 21 self-directed online courses for small business.

The online learning platform is in the final stages of delivery. Members are encouraged to reach out and discuss opportunities to communicate and raise awareness of the new support offerings for small business.

Members' comments

Members were positive about the scenario-based learning and bite sized format of the new online learning resources. Members noted the support offerings will strengthen relationships with trusted advisers.

Education for micro business, for example direct selling industry, was highlighted with members expressing interest in how online learning could be tailored to this audience.

Whilst the support offerings were praised, the challenge faced by businesses unable to easily access online learning was highlighted and appreciation shown for onsite and face to face engagement, especially in regional and remote areas.

Members and the ATO expressed a desire to work together to share information more broadly with small businesses including micro and Indigenous businesses.

Agency updates

ATO

The ATO is encouraging eligible small businesses with overdue income tax returns, fringe benefits tax returns, or business activity statements, to take advantage of the Small Business - Lodgment Penalty Amnesty Program as soon as possible noting the expiration date of 31 December 2023.

Over 7,200 small businesses have taken advantage of the failure to lodge penalty amnesty so far, with more than 19,000 eligible overdue forms lodged.

The Sharing Economy Reporting Regime was introduced on 12 December 2022. The ATO's priority is raising awareness among electronic distribution platforms and sellers who are in scope for the 1 July 2023 start date (travel service providers and short-term accommodation).

Tranche 2 work is beginning with consultation activities commencing with relevant industry advisers. This includes understanding the business models of sellers and electronic distribution platforms.

Treasury

The government is taking decisive action in response to PwC tax leaks scandalExternal Link, including changes to promotor penalties, secrecy provisions, Tax Practitioner Board registration and reforms to the whistle blower provisions.

Submissions on the exposure draft legislation for the small business energy incentive have been received. The government is mindful that the incentives expire on 30 June 2024. Work is underway to introduce the legislation into parliament.

Work to also underway to introduce the $20,000 instant asset write-off legislation into parliament.

Amendments to the Consumer Data Right (CDR) statutory framework are being introduced to enable accredited parties (including small businesses) to not only access data but initiate actions (such as payments) on consumers’ behalf, with their consent. The CDR rules have also been changed to permit small business consumers to share data through the CDR system with a wider range of recipients, including their bookkeepers and accounting platforms.

The government is providing additional funding for a small business cyber wardens program which will be delivered by the Council of Small Business Organisations Australia. The program will support small businesses to build in-house capability to protect against cyber threats.

The independent, statutory review of the Payment Times Reporting Act 2020 is complete with the government considering the report.

The independent review of the Modernising Business Registers program is also with government.

Australian Small Business and Family Enterprise Ombudsman

The Australian Small Business and Family Enterprise Ombudsman has released an issues paper to support the Inquiry into Commonwealth procurement rules on small and family business. The paper seeks to draw out experiences and insights about challenges faced by small and family business when approaching government for procurement.

The Small Business Matters report has been released. The report highlights the average small business owner is a self-employed man over 50, who works full-time and earns below the average full time wage. Further, female small business ownership continues to rise, with women accounting for 35% of all small business owners.

Requests for assistance numbers remain within an average window of 5,000 to 6,000 enquiries each year. Most requests relate to:

• payment disputes over outstanding payments upon the delivery of goods
• mental wellbeing issues, with support channels provided where appropriate
• franchise enquiries and digital platform assistance regarding false reviews
• financial disputes, particularly those with third tier lenders; interest rates and costs are often substantially higher (up to 50% per annum) and lock clients in for a long period of time.

Members' comments

Chartered Accountants Australia & New Zealand (CAANZ) have held knowledge sharing sessions with members on debt and how to negotiate payment plans. Many members are small businesses and there is value in working closely with the ATO to understand cash flow and managing debt. CAANZ are happy to promote new cash flow and online learning resources, including how members can incorporate them as a value-add service for clients. Dispute management and lodgment deferral is also a topic of interest among the CAANZ members.

Members suggested the ATO consider a centralised communication for small business clients that acts as a reminder of what is on the horizon. Members also noted that nudge messaging needs to be nuanced and applied only when action is required to remove unnecessary stress on small business.

The COSBOA & Square Quarterly Data ReportExternal Link has been released. The report indicates sale revenue is slowly growing but needs to be balanced with escalating operational costs. There is continued pressure on small business, particularly across the labour market with some sectors seeing a 200% rise in job vacancies. If positions are not able to be filled there will be an impact on growth, productivity and jobs.

Direct selling members report market conditions remain tough with a reduction in discretionary consumer spending. Members would like greater clarity on how the sharing economy reporting regime will apply to the industry.

The retail industry is still struggling with a decrease in consumer spending and higher costs of doing business, creating pressure on cash flow and profit margin. Members are also concerned about industrial relations changes. A survey recently conducted with Australian Retailers Association and American Express Small Retail Index (PDF 1.97MB)This link will download a file highlighted costs and falling sales are the biggest industry concerns, however there is a general sense of optimism beyond the next 12 months.

Housing and rental shortages continue to impact the real estate industry. Interest rates and inflation are also front of mind.

Indigenous Business Australia are interested in exploring opportunities to promote the new cash flow coaching and online learning resources to support and educate Indigenous business.

Attendees

Attendee list

Organisation	Member
ATO	Will Day (Co-chair), Small Business
ATO	Andrew Watson, Individuals and Intermediaries
ATO	Emma Tobias, Small Business
ATO	Karen Foat, Australian Business Registry Services
ATO	Vivek Chaudhary, Lodge and Pay
Australian Chamber of Commerce and Industry	Natalie Heazlewood
Australian Retailers Association	Jason Robertson
Australian Small Business and Family Enterprise Ombudsman	Craig Latham
Chartered Accountants Australia and New Zealand	Susan Franks
Council of Small Business Organisations Australia	Luke Achterstraat
Direct Selling Australia	Adele Sutton
Indigenous Business Australia	Greg Ellis
Institute of Certified Bookkeepers	Matthew Addison
Real Estate Institute of Australia	Anna Neelagama
Small Business Operator	Paul Meissner
Small Business Operator	Tony Sama
Treasury	Bede Fraser
Treasury	Kate O’Rourke

Guest attendees

Guest attendee list

Organisation	Member
ATO	Anita Challen, Lodge and Pay
ATO	Annie Ferguson, Lodge and Pay
ATO	Anthony Marvello, Small Business
ATO	Bianca Armytage, Marketing and Communication
ATO	Caryn Kaluzinski, Superannuation and Employer Obligations
ATO	Eileen Eaton, Small Business
ATO	Jacqui Marchment, Lodge and Pay
ATO	Karen Clifford, Small Business
ATO	Naomi Westwood, Superannuation and Employer Obligations
ATO	Peta Lonergan, Superannuation and Employer Obligations

Apologies

Apologies list

Organisation	Member
ATO	Emma Rosenzweig, Superannuation and Employer Obligations
Australian Small Business and Family Enterprise Ombudsman	Bruce Billson (Co-chair)
Australian Veterinary Association	Moss Siddle
Real Estate Institute of Australia	Jock Kretalis
Restaurant and Catering Association	Suresh Manickam