Term | Meaning |
|---|---|
accrual revenue | Accrual revenue is based on the 'economic transaction method'. It reflects the tax liabilities for the period in which an economic activity actually occurred. This approach facilitates comparison with economic events in the same period. |
aggregated turnover | Another definition of group income is anchored in Division 328 of the Income Tax Assessment Act 1997 (ITAA 1997), which describes small business entities. It differs from the 'total business income' definition. It is generally the annual turnover of the business plus the annual turnover of any business connected to or affiliated with it. |
Australian Bureau of Statistics (ABS) | The statistical agency of the Australian Government. The ABS provide statistical information on a wide range of economic, environmental and social issues. This assists and encourages informed decision-making, research and discussion within governments and the community. |
Australian National Accounts | Economic statistics produced by the ABS on income, expenditure and production in the economy. |
avoidance | Tax avoidance occurs when taxpayers exploit the tax laws to gain an advantage. Such transactions generally serve no commercial purpose and are entered into merely to obtain a tax benefit that was not intended by parliament. The extent to which tax avoidance is included in the tax gap depends on whether it is contestable. |
bottom-up approach | A detailed examination of specific data sources (typically individual tax returns through audit or review) to determine the extent of non-compliance across the whole population. Data sources can range from tax returns, audit data, risk registers or data matching. It includes random enquiries, operational data, statistical approaches and model-based methods. These methods are typically used for direct taxes. |
business activity statement (BAS) | The form lodged by businesses on a monthly, quarterly or annual basis to report certain tax obligations, including PAYG, fringe benefits tax (FBT), luxury car tax (LCT), wine equalisation tax (WET), and goods and services tax (GST). |
compliance | In accordance with established legislation and the intent and spirit of the tax law. |
compliance activities | Direct interventions we initiate to ensure taxpayers comply with their tax and superannuation obligations. |
economic group | Financially or administratively connected entities with a common source of control (majority or effective ownership of greater than 50%). |
error | Mistakes made in submitting information to us, including when lodging a tax return. An error can be intentional or unintentional. |
excise | A tax on alcohol, tobacco, fuel and petroleum products produced or manufactured in Australia. Collectively, these products are referred to as excisable goods. |
excise equivalent goods (EEGs) | Imported alcohol, tobacco, fuel and petroleum products (including LPG, LNG and CNG) that are subject to duty are treated consistently with goods manufactured in Australia. |
evasion | The act of evading tax obligations. Tax evasion occurs when people break the law by not reporting all of their income, or dishonestly overstating deductions to reduce the amount of tax they need to pay. Examples of tax evasion include under-reporting income, not reporting cash wages, not lodging tax returns or not paying employee superannuation entitlements. |
excise clearance data | The excisable units (litres, numbers or kilograms) of excisable products cleared for home consumption and reported by excise clients on their excise return. |
failure to take reasonable care | Occurs when a taxpayer does not do what a reasonable person in the same circumstances would have done. Circumstances include age, health, knowledge and education. |
fraud | Wrongful or criminal deception intended to result in financial or personal gain. This includes claiming tax refunds and money laundering, using false or stolen identities, claiming GST credits for goods or services that GST was not paid on, and claiming deductions for expenses not incurred or legally deductible. |
fuel excise | A tax on fuel and petroleum products (excisable goods) produced or manufactured in Australia. Imported fuel and petroleum products are subject to customs duty at a rate equivalent to excise. This is to ensure they are treated consistently with goods manufactured in Australia. These imported goods are referred to as excise equivalent goods (EEGs). |
gross tax gap | The net gap plus the amount of revenue we raise and collect through our compliance activities. |
high wealth private groups | A private business group that controls net wealth of $50 million or more. |
interest (as in business interest in another business entity) | Majority or effective ownership of a business entity within an economic group. |
luxury car tax (LCT) payable | The amount of luxury car tax payable, as reported at label 1E on the business activity statement. |
median adjustment | The midway point of all label adjustments made. The median differs from the mean, which is the arithmetic average (adding all adjustments and dividing by the number of labels adjusted). The reason we use median rather than mean is because it is a more accurate representation of adjustments, as it reflects the sample size being used. For example, a small number of large value adjustments will overstate the true value of adjustments in the sample. |
net tax gap | The difference between theoretical tax according to the law, and actual tax paid voluntarily or collected as a result of compliance activities. |
non-detection | Some errors are not identified in bottom-up methodologies. To fully estimate the gap, we increase the amounts that we do identify to account for amounts we don’t. We refer to this increase as an 'uplift factor'. Non-detection is inherently difficult to estimate, and we will revise the uplift factors applied as our methodologies improve. |
non-payment | Debts to us that have been written off or are currently outstanding. |
pay as you go (PAYG) withholding | The value of income tax withholding payable by employers on employee salary and wages. Other withholding not from salary and wages (including non-resident interest, dividend or royalty withholding, no-ABN and no-TFN) are excluded. |
petroleum resource rent tax (PRRT) | A profits-based tax that only taxes profits above a specified rate of return from the sale of petroleum resources. PRRT is not a royalty or a traditional income tax. It is rather a tax on ‘rents’ in the sense of excess returns that only taxes assessable receipts when they exceed deductible expenditure on a project-by-project basis. PRRT will only arise when a project has recovered all eligible outlays associated with the project (after deducting eligible exploration expenditure transferred from other projects), including the achievement of a threshold rate of return on the outlays. |
pillars of compliance | The 4 pillars of compliance are:
|
random enquiry program (REP) | A process for selecting tax returns for evaluation that ensures all tax returns have the same likelihood of being chosen. |
shadow economy | In previous releases, we referred to the 'black economy', which is also often known as the 'hidden economy', 'cash economy' or 'non-observed economy'. For tax gap purposes, we now refer to the shadow economy. Refers to the 'economic underground' boundary of an Organisation for Economic Co-operation and Development (OECD) framework. It involves economic activity not declared, which may be a result of attempts to avoid tax obligations. Australian National Accounts data makes a small allowance for expenditure associated with the 'underground economy' (cash economy transactions, transactions relating to other avoidance measures, and understatement of income in ABS surveys). |
tax gap | An estimate of the difference between what the ATO expects to collect and the amount that would have been collected if every taxpayer was fully compliant with the law for a defined period. |
top-down approach | Uses independent aggregated data sources to estimate the size of the theoretical tax base. These methods are typically used for indirect taxes. |
total business income (TBI) | All ordinary income earned in the ordinary course of running a business for the income year. |
value-added tax (VAT) | A tax on consumer spending. The tax is placed on a product or service when there is value added at the stage of production or at the final sale to the consumer. Each business in the supply chain charges VAT on their sales and is entitled to a refund of VAT paid on their inputs or purchases. Australia’s GST is a value added tax on goods and services for domestic consumption. |
wine equalisation tax (WET) | A tax on wine consumed in Australia. It is based on the value of the wine sold and generally applies to the last wholesale sale (usually between the wholesaler and the retailer) although it may apply in other circumstances. |
Acronyms and initialisms
ABS | Australian Bureau of Statistics |
ABF | Australian Border Force |
ATO | Australian Taxation Office |
BAS | business activity statement |
CIT | corporate income tax |
CRA | Canada Revenue Agency |
EEG | excise equivalent good |
EU | European Union |
FTC | fuel tax credits |
GST | goods and services tax |
HMRC | His Majesty's Revenue and Customs (United Kingdom) |
HWI | high wealth individual |
IMF | International Monetary Fund |
IRS | Internal Revenue Services |
LCT | luxury car tax |
OECD | Organisation for Economic Co-operation and Development |
PAYG | pay as you go |
PIT | personal income tax |
PRRT | petroleum resource rent tax |
REP | random enquiry program |
SKAT | Danish Customs and Tax Administration |
TBI | total business income |
VAT | value added tax |
VIN | vehicle identification number |
WET | wine equalisation tax |