Key statistics
An effective tax system supports the social benefits we all enjoy in Australia. The key to an effective tax system is a high level of willing participation by the community. Participation is built on people valuing our tax system, and having trust and confidence in the Australian Taxation Office (ATO) to administer it. We share our insights about the tax and superannuation systems to improve awareness and encourage more people to participate willingly.
Individuals are the largest community segment that interact with our tax system.
In 2020–21, Australia had over 10 million individual taxpayers who were not in business and who lodged tax returns. These people earned their income from salary and wages, the sharing economy and investments.
In 2020–21, income tax collections from all entities represented 45% of all taxes.
In 2019–20, over 94% of the income tax we collected from individuals not in business was paid voluntarily or with little intervention from us, and the majority who were required to lodge did so on time.
While we have robust systems in place to ensure that people report the income they earn from most sources, we are concerned about non-reporting of cash wages and errors made when claiming deductions. While individual amounts of under-reported income and overclaimed deductions can be small, collectively, across a large population, they represent a significant amount of lost revenue.
We take our responsibility to the people of Australia seriously. Here you'll find details of the challenges we face and how we are improving the tax system to help people who want to comply, while taking firm action against people who choose not to. We hope this information provides you with a better understanding of how Australia's income tax system is operating for individual taxpayers, who are not in business.
The core of the system is strong
Individuals who are not in business are the largest of our taxpayer segments. In 2020-21, income tax represented 45% of all taxes we collected.
The majority of individuals who are not in business receive income from salary and wages. This is usually taxed at source and paid during the year under the pay as you go (PAYG) withholding system.
In 2020–21, personal income tax amounted to $215.2 billion. We collected $156.1 billion in PAYG withholding and other credit entitlements and returned $17.8 billion to individuals in tax refunds. We also issued $6.4 billion in debit assessments to individuals who owed tax.
Our PAYG withholding system ensures that most tax is collected automatically from individuals not in business, requiring little intervention from us.
Find out more about:
- The individuals population
- Working together
- Characteristics of the personal income tax system
- The four pillars of compliance
- Tax gap
The individuals population
There were nearly 20.5 million active tax file numbers (TFNs) registered to individual people in Australia as at 30June 2022. Of those, around 15.4 million were registered to individuals who are not in business.
Not all individuals who were registered for a TFN had an obligation to lodge a tax return. In 2020–21, there were 13.1 million individuals not in business who we predicted were required to lodge, and 10.4 million who lodged their 2021 tax return.
Who are individuals not in business?
We define individuals not in business by separating people who earn some or all their income from operating a business as a sole trader (including contractors) or through a related entity such as a partnership, company or trust. These people are part of our small business client group.
We also exclude individuals classified as belonging to privately-owned and wealthy groups (POWG) who, together with their associates, control a net wealth of $5 million or more. These taxpayers have distinct characteristics, needs and obligations and are managed by our POWG area.
This publication focuses on individuals who are not in business – for example, people who earn income from salary or wages, investments, superannuation or Australian Government assistance payments, and who do not have links to a business.
For the purposes of estimating the tax gap for individuals not in business we have refined the population. This population includes individuals who are connected to a high wealth group with less than $50 million in net assets. This adds an additional 500,000 clients to our usual population. The population definitions can be found in Australian tax gaps – overview.
Working together
We work with other government agencies to maintain the health of Australia’s tax and superannuation systems. Our role is to administer the tax law and key elements of the superannuation law and provide advice to the Treasury to support the development of tax legislative measures. We are also responsible for administering benefits, tax offsets and programs relating to a range of government policies, some in conjunction with other government agencies.
The Treasury is responsible for the design of the tax system and its components, and retirement income policy, in relation to economic efficiency, equity, income distribution, budgetary requirements and economic feasibility.
Tax and financial professionals, along with the associations that support them, also play a key role in the tax system. They help individuals navigate the tax laws and assist them to meet their tax obligations.
The Tax Practitioners Board is responsible for regulating tax agent services. The Board aims to assure the community that tax practitioners meet appropriate standards of professional and ethical conduct.
Individuals also have a role to play. We have a responsibility to contribute to public programs and community services by participating in the tax system, reporting correctly and paying the tax we owe.
Collectively, as stewards of and participants in the tax and superannuation systems, we all have something to gain by ensuring they work effectively, and are sustainable and viable into the future.
Characteristics of the personal income tax system
The principles in the law for determining how much income tax a taxpayer needs to pay are relatively simple in theory but applying the principles in practice can be complex. This has been noted by various reviews of Australia’s tax system.
The personalised nature of deductions, cost of compliance, changing circumstances, income from sources other than salary and wages and interactions between other government systems, all contribute to the complexity involved in completing an individual’s tax return.
These factors are reflected in the high proportion of individuals not in business that use the services of tax agents to help them prepare and lodge their personal income tax return (around 55%).
We also know that personal circumstances, financial literacy and perceptions of fairness can affect attitudes and behaviour in complying with tax obligations.
The four pillars of compliance
We monitor the level of willing participation of taxpayers against the Organisation for Economic Cooperation and Development’s (OECD) four pillars of tax compliance framework:
- registration
- lodgment
- correct reporting
- on-time payment.
We consider these elements in conjunction with indicators of public perceptions.
Based on our knowledge of how the system operates in practice:
- the majority of individuals who should be registered in the system are registered – although the growing instance of identity fraud is concerning
- while the on-time lodgment performance of individuals is improving, some individuals (including those who are due a refund) are not meeting their obligation to lodge a tax return or are doing so late
- most individuals report the right amount of income, although we have concerns about non-reporting of cash wages and many are still making errors when claiming deductions (including those lodging through tax agents)
- of all our client groups, individuals have the lowest rate for on-time payment of tax liabilities (outside of employer withholdings) and the level of debt is higher than we would expect.
The majority of individuals think we are fair and professional in administering the tax and superannuation systems and we are continually working to improve community perceptions.
Tax gap
The tax gap is the difference between the tax payable according to law and the tax actually reported from taxpayers in a given period. The vast majority of tax due is paid voluntarily and audit activity collects some of the remainder. What is left uncollected is known as the tax gap.
The community expects us to manage all aspects of the tax and superannuation systems, including advising on tax gaps, what is driving them and what we are doing about them. Estimating tax gaps is consistent with contemporary international best practice in tax administration.
Our tax gap estimate for individuals is informed by our random enquiry program that provides data to give us a reliable and credible estimate of the income tax gap for individuals not in business starting from 2014–15 up to 2019–20
The tax gap for individuals not in business is a relatively small proportion of the total income tax base for this segment. For 2019–20, the estimated net tax gap was 5.6% or $9.0 billion.
While there are many components of the individuals tax gap, analysis shows that deductions for work-related expenses are the main contributor. Deductions for rental property expenses are also a factor, along with omitted income, particularly in relation to undeclared cash wages (an aspect of the shadow economy).
How we measured the tax gap for individuals
To measure the tax gap for individuals not in business, we drew on operational data for specific compliance risk areas; for example, failure by employers to withhold, non-lodgment and non-payment of debts. We then combined this data with findings from the random enquiry program to estimate the difference between the amount of tax individuals report and the amount that we expect if every individuals was fully compliant with the law.
Tax gaps can be split into 2 components:
- gross gap – the difference before active compliance activities is taken into account
- net gap – the difference after active compliance activities is taken into account.
Our ultimate goal is to reduce the gross tax gap to a minimum, by increasing willing participation, noting that a zero tax gap is not practically achievable. No regulatory agency is resourced to eliminate the gap completely.
Element |
2014–15 |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
|---|---|---|---|---|---|---|
Gross gap ($m) |
8,980 |
9,539 |
9,880 |
10,366 |
9,611 |
9,673 |
Adjustments ($m) |
809 |
751 |
895 |
711 |
575 |
643 |
Net gap ($m) |
8,171 |
8,788 |
8,984 |
9,655 |
9,036 |
9,030 |
Gross gap (%) |
7.1 |
7.1 |
7.1 |
6.9 |
6.3 |
6 |
Net gap (%) |
6.4 |
6.5 |
6.4 |
6.4 |
5.9 |
5.6 |
Tax gap estimates and their trends over time provide useful insights into the longer-term operation of the tax and superannuation systems. Along with other measures, they tell a story about the performance and integrity of the system, including levels of willing participation and significant shifts in compliance.
Our primary concern is the incorrect reporting of deductions
The tax gap, for individuals not in business. is primarily influenced by incorrectly claimed deductions, particularly for work-related and rental expenses. Mistakes are more prevalent in agent-prepared than in self-prepared returns.
Incorrect deduction amounts over claimed tend to be small for each individual; however, this trend is concerning as:
- Small incorrect amounts claimed by this large population add up, to impact significantly on the tax revenue available to fund programs benefitting our community.
- It indicates some individuals and agents are unclear about what deductions they can claim and the operation of the substantiation rules, or perceive it is acceptable to bend the rules.
Incorrect calculations of taxable income resulting from overclaimed deductions can affect the accuracy of credits and offsets.
Work-related expenses
Work-related expenses remain the main contributor to the net tax gap, making up 41% or $3.7 billon. Employees are entitled to claim deductions for work-related expenses if all the following apply:
- you spent the money and were not reimbursed by your employer
- your expense was directly related to earning your income and was not for a private purpose
- you have a record such as a receipt, bank statement or diary entry to prove the amount you claimed or how it was calculated.
Errors at the deduction items range from genuine mistakes to deliberate over-claiming. However, most commonly we see deductions being claimed where there is no connection to income earned or no substantiation to show an expense was incurred. We also see claims for expenses that are private in nature.
Working in partnership with the tax profession and the community, we have increased the level of understanding of when a claim can be made and the records needed to verify them.
Rental expenses
In 2019–20 we completed over 100 rental audits as part of our random enquiry program and found errors in almost 9 out of 10 returns. Rental deductions contribute $1.3 billion to the net tax gap.
The random enquiry program and our broader compliance programs found most mistakes could be avoided by identifying:
- when an investment loan has been refinanced or redrawn on for private purposes and apportioning the interest expenses
- the proportion of time a rental property is used for private purposes and apportioning deductions appropriately
- what records need to be kept to make deduction claims, to prove the income you earned and to demonstrate that your property was genuinely available for rent or steps you have taken to build a dwelling.
While there are a number of factors contributing to the issues we see, our ability to effectively administer deductions is limited by a lack of third-party data to verify claims and provide pre-fill information in tax returns.
The community expects people to lodge their tax returns and pay the right amount of tax, however many people are not getting their deduction claims correct.
The government provided us with additional funding in the 2019–20 Budget allowing us to expand our work-related expenses and rentals program of work. We expect to engage with over a million clients (directly and indirectly) about their work-related expenses claims and review 4,500 rental claims this year.
We are an active and capable regulator
We have increased investment in the individual taxpayer segment. We continue to build the capability of our staff to improve the experience for taxpayers and their agents.
We have long maintained a focus on recent developments in data and technology, along with insights gathered from our tax gap work, are highlighting areas requiring extra attention.
To address these, we have increased our investment in design and consultation to build the capability of our staff and systems to improve and influence community attitudes towards the tax system.
ATO staff
The ATO workforce that is focused on individuals is more informed and enabled than it has ever been.
We continue to build on a highly capable workforce of over 900 staff dedicated to assisting and assuring the tax compliance of individuals and their tax agents. These experts are allocated to roles ranging from help and education, through to audit, prosecutions and debt management for this segment.
We have developed the skills of staff working with new technology and digital systems. We have also worked to improve our internal systems to give staff better visibility of a taxpayer’s history of ATO interactions. This enables us to provide a more responsive and holistic service to taxpayers and tax agents.
Technology and data
Given the number of individuals in the tax system, our success depends on our ability to use data in sophisticated ways and provide taxpayers with digital services that make it easy for them to comply and hard not to. We do this by simplifying and automating our processes wherever possible, and by pre-filling information about income and tax offset entitlements to prevent errors upfront.
Preparing a tax return has evolved from a paper and post activity to the use of electronic lodgment channels and the introduction of pre-filled data. Our ability to receive, match and pre-fill large volumes of data from third-party providers, particularly in respect to income, allows us to share the information we hold about an individual’s tax affairs with them or their agent, before they lodge. This results in a better experience for our clients and facilitates self-regulation.
We have worked with data providers to extend our data sources, expand the range of information available through our pre-filling services and obtain data more quickly following the end of the income year. This means we can provide a more complete pre-filling service sooner for individuals.
For example, in Tax Time 2022, we offered 98,000 people with simple tax affairs who prepared their tax themselves, with the option of an automated or ‘push’ assessment. People who chose to participate were not required to complete a tax return. We simply issued an assessment notice along with their refund. This initiative proved to be positive for participants. In future, this offering aims to streamline the lodgment process for individuals with straightforward affairs, making it easier for people to meet their tax obligations on time.
We will continue to expand our use of data and technology to streamline processes, keep pace with community expectations and ensure integrity in the income tax system.
Design and consultation
We are committed to consultation and co-design as a means of improving the administration of Australia’s tax and superannuation systems. Our products, processes and systems are created and refined in collaboration with experts, designers and users to ensure they are useful, usable and desirable.
Our consultation framework includes tax practitioner and individuals stewardship groups, as well as special purpose working groups, topic and industry-specific collaborations and ATO Community online engagement sites.
The ATO also provides insights to government and the Treasury about potential opportunities for statutory law reform to improve the design of the tax system. We do this when the law is difficult for both taxpayers and ourselves to apply, which can increase compliance costs. In addition, we suggest where the law can be strengthened to allow us to more effectively deal with compliance risks.
Influencing community attitudes
There are many factors that influence a taxpayer’s attitude towards the tax system. But in our experience, people are more likely to comply when they trust that the system is fair and have confidence that others are complying too. For this reason, we balance our efforts across all segments of the population to make sure everyone, and every business, pays the right amount of tax.
To be transparent about our work, the Commissioner of Taxation regularly reports to the government and the community on our performance in the ATO’s annual report. We also work collegiately with a range of independent scrutineers and appear regularly at parliamentary hearings to answer questions in relation to our decisions and performance.
We contribute to public debate where appropriate through the media, and host and participate in online discussion forums. The Commissioner, along with other representatives of the ATO, other government agencies and the tax profession, speak publicly at events and gatherings throughout the year. We measure community perceptions and the level of willing participation and share information about our approaches and what we see occurring in the tax and superannuation systems.
We focus on prevention before correction
It is universally recognised that getting the right amount of tax paid in the first place is the most efficient way to operate a tax system from all perspectives, including the cost to the taxpayer.
We take a proactive approach to help individuals get their tax right from the start. However, a fair and balanced system requires both preventative and corrective action, in the right measure.
In a large market as large as individuals, an effective way to reach taxpayers is often through an intermediary. We leverage our compliance approaches – from help and education through to reviews and audits – through tax agents and employers, tailoring them to address similar needs and compliance behaviours. We do this by:
- Providing advice and guidance
- Working with the tax profession
- Supporting employers
- Facilitating self-regulation
- Supporting those who need more help
- Providing superannuation education
- Detecting and dealing with non-compliance
- Resolving disputes
- Protecting the integrity of the system
- Instigating prosecution action
Providing advice and guidance
To make it easier for individuals to understand how the law applies to them, we provide easy-to-understand guidance material and tools on our website. Examples include work-related expenses videos, occupation-specific guidance on allowable deductions and tax offset calculators, and Alex our website’s virtual assistant. We also provide public and private rulings for particular topics and circumstances.
We use mainstream and social media to remind individuals of the need to lodge and correctly report their tax information to us using myTax or a registered tax agent. We also issue email prompts throughout the year to alert taxpayers to issues, remind them of tax-related events that may require reporting and provide information to help them get their tax right.
Working with the tax profession
Tax professionals have a critical role in the tax and superannuation systems. To support them, we provide agents with access to information we hold about their clients’ tax affairs in a secure way, and electronic tools and services such as the practitioner lodgment service to make it easier for them to lodge information with us. We also provide tax agents with work-related expense ‘risk pictures’ that are customised to their client base, to help them understand our view and where they can take steps to reduce risk.
We recognise and support agents who have good practice management, lodge electronically and consistently lodge on time. We help these agents to smooth the cyclical peaks in their client workload through a program that accommodates lodgment over a 12-month period.
The administration of the tax and superannuation systems will change in the coming years as we and the tax profession continue to modernise. We have established a working group to better understand the future role of the tax profession in the system. We are looking at opportunities to collaborate more effectively to achieve better outcomes.
Supporting employers
As most of the income received from individuals not in business is from salary or wages, employers also play an important role in the system.
We provide guidance on our website and tools, to help employers determine the employment status of their workers and meet their PAYG withholding and super guarantee payment obligations. We also work with employers and industry representatives to design tailored guidance material such as fact sheets to help employees understand their obligations.
Single Touch Payroll has also been introduced. This change has modernised how we interact with employers and will mean they can all easily report PAYG withholding and superannuation information to us directly from their payroll solution at the same time they pay their employees.
For employees, Single Touch Payroll will allow timely visibility of tax withholding amounts and payments including salary and wages, allowances, deductions and super through myTax.
Facilitating self-regulation
For individuals who choose to self-prepare their tax return using myTax, we pre-fill as much data as we can to minimise errors. We also provide a web chat service for taxpayers using myTax to help them complete their returns. We use pre-lodgment prompts such as myTax nudge messages and advisory letters to encourage people to accurately report information in their returns and lodge on time.
People can use the myDeductions function on the ATO app to keep records during the year and upload these to their myTax return or send them to their tax agent. We also provide guidance material on allowable deductions for specific industries and occupations to better reflect today’s employment market.
We help individuals manage their tax debts by sending SMS payment reminders, letters or phoning them.
For Tax Time 2022, we have:
- used third-party data from share registries and other financial services providers to remind people to correctly calculate and report capital gains and losses on the sale of shares and units
- expanded our push assessment offering, focusing on those with franking credit refunds.
Supporting those who need more help
We offer contact centre and face-to-face services including the Tax Help program where ATO volunteers help low income taxpayers prepare and lodge their return online.
We also hold tax time pop-up shops in community and shopping centres to help taxpayers with general enquiries and the transition to digital services. Additionally, we provide services through Services Australia as a myGov member agency to assist people to understand and meet their tax obligations.
We know that people sometimes make mistakes. Therefore, if we find an inadvertent error in particular tax returns, we will not apply a penalty. Instead, we will show the person where they went wrong and how to get it right next time.
To support tax agents, we visit practices and host professional events to provide tailored help and support including updates about law changes and issues that require attention.
Providing superannuation education
We help the community understand their superannuation entitlements through our superannuation education and communication initiatives.
We have information and examples on our website to help the community understand changes to the income threshold for super contributions (change to Division 293 income threshold). We also have the YourSuper comparison tool to assist people in comparing and choosing superfunds to meet their needs.
We help reunite people with their lost or unclaimed super through marketing campaigns, including on social media. We publish lost super by postcodes, providing super funds with updated contact details for their lost members and encouraging individuals to access ATO services through myGov.
On 30 June 2022, over 12.6 million Australians had one superannuation account, with around 3 million people holding 2 or more accounts.
Detecting and dealing with non-compliance
We use data-matching evidence to identify taxpayers with a requirement to lodge and systematically check all tax returns. Sophisticated analytical models can identify individuals who are making errors or displaying higher-risk behaviour and may need increased assistance or attention from us to get things right.
Where our analysis indicates patterns of errors or irregularities for:
- an individual’s tax return – we bring them to the attention of the individual or their tax agent, and work with them to amend the assessment
- a cluster of individuals employed by the same employer or in the same industry – we work with employers and industry associations to understand why this is occurring and address any misconceptions about how the rules apply to individuals in these circumstances.
We also provide information on the Common errors made my individuals that concern us.
We will continue to focus our corrective compliance efforts on the highest risks to the integrity of the system including individuals who:
- are not lodging tax returns including those with the financial capacity to meet their child support payment obligations
- display higher risk behaviours when reporting information in their tax return such as under-reporting income and overclaiming deductions
- are not paying their tax debts.
We also maintain a focus on higher risk tax agents who display unacceptable behaviours such as:
- exaggerating or falsifying deduction claims to retain or increase their market share
- committing fraud against the Australian Government or their clients, intentional and sustained misreporting, and taking positions contrary to established law.
We have strategies in place to identify and closely monitor these agents. Our interventions include education, additional reporting and reviews and audits of their client base. Where we see evidence of a breach of the Tax Agent Services Act 2009, we refer the agent to the Tax Practitioner’s Board. We also follow up on information provided by the community and other practitioners to protect the community, the profession and the integrity of the tax system.
In addition, we pay close attention to employers to ensure they report the correct amounts of PAYG withholding tax. We take action where we see employers avoiding their tax and super responsibilities by improperly treating workers as contractors. This behaviour undermines the tax and superannuation systems, can adversely affect workers that are employees by law and creates unfair competition for honest employers.
Resolving disputes
Individuals who disagree with a decision we have made about their tax affairs have the right to have the decision reviewed. While taxpayers have a right to object to amended assessments made by us, only a minority of individuals (including those in business) with amended assessments do so. Of these, the majority are resolved as a result of facilitation. We aim to approach disputes in a fair, efficient and respectful way and recognise that resolving disputes early and as quickly as possible, lowers costs for both taxpayers and us.
We encourage individuals to use our free in-house facilitation service to resolve disputes. We also offer a Dispute Assist service for vulnerable unrepresented individuals such as elderly taxpayers and those dealing with family illness, domestic violence or mental health issues.
Where individuals object to an amended assessment from us, we seek to resolve the objection as quickly as possible. Depending on the nature of the objection and the taxpayer’s circumstances, we may agree to a settlement or proceed with litigation.
Protecting the integrity of the system
While we focus our efforts on preventing non-compliance, as administrators it is also our role to protect the integrity of the Australian tax system and ensure everyone pays the right amount.
We take firm action against people who intentionally falsify information on their tax returns including penalties or prosecutions in serious cases. In conjunction with partner agencies, we target people who profit from criminal activity and work to protect taxpayers from fraudulent activities.
Refund fraud occurs when people make false claims in tax returns to obtain a refund. We use analytical models to assess tax forms, and share data and intelligence with our partner agencies to detect and prevent fraud.
We identify, monitor and respond to TFNs that have been (or appear to be) compromised by fraudulent activities. Confirmed cases of compromised TFNs have increased from 6,697 individuals (including some in business) in 2014–15, to 21,626 in 2020–21. This rise is due to significant increases in digital and online interactions, and subsequently higher instances of identity theft and cybercrime. We encourage taxpayers and agents to safeguard their personal information and apply extra security measures to protect affected taxpayers. These may include enrolling a voiceprint or applying a password to ensure taxpayers can continue to interact safely with the tax system.
We provide information on our website to help people identify and report scams. We issue messages warning the community about specific scams as they emerge and encourage all taxpayers to protect their personal information. Where a person’s identity has been stolen, we provide support services, so they can continue to engage in the tax and superannuation systems.
Aggressive tax planning schemes seek to allow participants to inappropriately obtain concessions or other tax benefits. We issue communications and offer education programs to discourage individuals from participating in these schemes.
Instigating prosecution action
Criminal prosecutions play an important role in helping us to maintain the integrity of the Australian tax system and ensure people meet their tax obligations. They are only used in the most serious cases.
Generally, we instigate prosecution action to pursue tax administration offences in response to repeated non-compliant behaviour over a sustained period of time. This may include continually ignoring ATO requests to lodge a tax return or disregarding our advice and deliberately lodging returns with false or inflated claims.
We measure community perceptions and the level of willing participation
Like most administrations, we rely on a range of performance indicators to measure the health of the tax system. While direct revenue collections tell an important part of the story, we are also interested in how our interventions affect compliance behaviour over the longer term.
Collectively, our measures offer rich insights that guide us in determining priority risks and opportunities as well as how best to invest our resources.
We do this by assessing:
Community perceptions of confidence
We regularly conduct surveys and measure ourselves against performance targets to ensure our interactions with clients build trust and confidence in the tax and superannuation systems and foster willing participation. In 2018–19 we introduced a confidence measure aligned to our 2024 aspiration of building trust and confidence. In September 2020, the findings for individual clients showed that:
- the overall client confidence score was 68/100
- confidence among clients interacting with the ATO in relation to a debt hit a record high of 70/100
Our survey results generally show that perceptions of the ATO are much more likely to be favourable than unfavourable. They also indicate that recent contact with us has a positive influence on wider perceptions of us. Nevertheless, we know there is always room to improve. We are constantly working to build community trust and confidence in our administration, across all our service areas.
Willing participation
In line with the Organisation for Economic Co-operation and Development (OECD) best practice guidance such as Measures of Tax Compliance Outcomes – A practical guideExternal Link, we use estimates of tax gaps, audit yield and estimates of wider revenue effects to evaluate the impact of our prevention and correction strategies on the level of willing participation for individuals over time.
Total revenue effects
Total revenue effects are a measure of the revenue we collect as a result of our compliance interventions including audits, other direct interventions and improvements to the design of the tax administration process. Here, we separate these collections into audit yield and wider revenue effects.
Audit yield is the additional tax liabilities identified and collected through audit activities including interest and penalties.
Wider revenue effects are an estimate of revenue collected as a result of ongoing behavioural change following an ATO action. It measures the additional tax revenue that results from all our client engagement activities that can be measured and are not already captured by audit yield. This includes revenue from our preventative and corrective activities designed to assist and encourage clients to pay the right amount of tax in future. It also measures changes in compliance from a wider taxpayer population that has not been subject to a direct intervention.
A key principle we use when measuring wider revenue effects is ensuring there is a clear causal connection between our activity and the change in taxpayer behaviour.
We expect the amount we attribute to wider revenue effects will grow as our strategies to foster willing participation become increasingly effective.
|
2019–20 |
2020–21 |
2021–22 |
|---|---|---|---|
Audit actions and incorrect claims stopped (previously reported as audit yield) |
$452.9m |
$466.3m |
$755.4m |
Lodgment actions |
-$6.8m |
-$189.7m |
-$143.6m |
Subtotal (previously audit yield) |
$446.1m |
$276.6m |
$611.8m |
Prevention and sustained compliance |
$1.0b |
$954.9m |
$923.5m |
Sustained lodgment compliance |
-$159.7m |
-$136.4m |
-$131.3m |
Subtotal |
$873.3m |
$818.6m |
$792.3m |
Total Revenue Effects |
$1.3b |
$1.1b |
$1.4b |
Tax assured
Tax assured is the proportion of tax paid that we are confident is correct.
For individuals not in business, third-party data matching provides us with a high level of confidence that income shown at particular return items is correct. However, we do not have the same ability to assure information relating to deductions and some offsets.
In 2016–17 we estimate around 75% of tax paid by individuals not in business can be assured as correct.
As the quantity and quality of data we collect improves, we expect the amount of revenue we deem to be ‘assured’ will increase.
Revenue measures framework
Our revenue measures work in combination to provide a holistic view of the health of the income tax system. The relationship between these measures is illustrated in the diagram below.
Income tax system measures
We rely on a range of performance indicators to measure the health of the tax system. Our measures offer insights into risks and opportunities, and fairness targets to foster willing participation.
How the Australian income tax system works for individuals who are not in business and supports our social benefits.