In a keynote address to a tax professional association in Tasmania in October, the ATO’s Second Commissioner, Law Design and Practice, Andrew Mills, spoke about the ATO’s new program of work “Better as usual”.
The initiative is focused on finding realistic ways that the ATO can improve its processes and avoid both the incidence and the impact of cases where things go awry — especially with its interactions with the important small business community.
“Recently we released the 2015-16 tax performance measures for the small business market,” Mills said. “And the results showed that Australian small businesses are doing a great job when it comes to paying their tax. They voluntarily paid $76 billion in income, representing about 87.5% of the tax owed.”
Mills stated that this was a good result, and that it was comparable to similar jurisdictions around the world. He said the tax performance measures also show that an estimated 60% of the gap (or approximately $7 billion) is due to the black economy, “meaning that the vast majority of those trying to do the right thing are keeping up with their obligations”, he said.
“Now don’t misunderstand me,” Mills said. “When I talk about how well this market is performing, I’m not trying to sell short the difficulty of running a small business. We hear from small businesses every day and we know how hard it can be for them to juggle the many demands on their time and resources. They have ideas for how we could be doing better, and we’re listening.”
Three key attributes of successful small businesses
He then went on to point out the attributes that the ATO has found, over many years of dealing with the issues that can plague a smaller business, are key to the success of every enterprise.
Cash flow management
The first is effective cash flow management. “With nine out of 10 small businesses reporting that they had cash flow issues in the last year, it’s probably the number one problem businesses cite when they’re in tax trouble, and a focus for us at the ATO.”
In addition to the on-the-ground support the ATO can provide, including the 2,300 community events held over 2018-19 for almost 25,000 attendees, Mills said the ATO also offers a range of services and resources to help small businesses better manage their affairs. These include:
- a business performance check tool
- the ability to pre-pay activity statement liabilities
- preventative SMS payment reminders
- ATO accounts being available online
- The ATO’s automated phone service that allows taxpayers to set up payment plans.
The second key attribute Mills said is found with every successful small businesses is digital-readiness.
“We know that the more digitally-advanced a small business is, the more likely they are to be on top of their tax obligations,” he said. “Taking advantage of digital advancements allows us to build a tax system that works better for our clients, integrating with technology taxpayers already use to make meeting obligations easier.”
Although Mills offered STO as an example of technological shifts at the ATO, he acknowledged that, for a range of reasons, some businesses find the transition to digital harder than others. “That’s why we’ve offered a range of support measures, from educational resources to a deferred start date to exemptions for those without internet.”
The third key indicator for success in small business, Mills said (“and I know I don’t need to persuade any of you of this”) is having a professional adviser.
“While the ATO does a lot of work to mitigate the complexity of small business tax, we tend to find the single best predictor of success for a small business is whether or not they have a professional adviser,” adding that the ATO sees tax professionals as being vital to the health of the system and the small business market.
“So what we need from you is to continue to work closely with your clients, and proactively engage with them on a regular basis,” he said. “You are gatekeepers of the system, and by exercising due diligence, asking the right questions and examining their assumptions, you can position your clients for success.”