Much has been said in recent times by the ATO about the Tax Gap Overview and the recent re-focus of the ATO onto the SME sector as a project of fiscal importance. To give our readers an overview of the same we attach here below a point header summary provided to Accountants by the Taxation Institute of Australia (TIA). We hope you find it inciteful.
Tax gap overview
The tax gap is an estimate of the difference between the amount the ATO collects and what they would have collected if every taxpayer was fully compliant with tax law.
Tax gap estimates and their trends over time provide useful insights into the longer-term operation of the tax and superannuation systems.
Summary of latest tax gap estimates
- Fuel excise gap – the net fuel excise gap is estimated to be $326 million (1.9%) in 2015-16.
- Fuel tax credits gap – the net fuel tax credits gap for 2016-17 is estimated to be –$19 million (−0.3%).
- GST gap – the net GST gap estimate for 2016-17 has trended slightly downwards from previous years to $5.26 billion (7.9%).
- Individuals not in business income tax gap – for 2014-15, the estimated net tax gap is $8.76 billion (6.4%).
- Large corporate groups income tax gap – in 2015-16, the net large corporate income tax gap is estimated to be $1.8 billion (4.4%).
- Large super funds income tax gap – in the 2015-16 year, the net large super fund gap is estimated to be $127 million (1.5%).
- PAYG withholding gap – the net PAYG withholding gap estimate for 2015-16 is $3.36 billion (1.9%).
- Petroleum resource rent tax gap – in the 2015-16 income year, the net gap is estimated to be $18 million (2.0%).
- Small business income tax gap – in the 2015-16 income year, the net gap is estimated to be $11.1 billion (12.5%).
- Small super funds income tax gap – for the 2014-15 year, the small super fund net tax gap is estimated to be $39.9 million (3.2%).
- Super guarantee gap – for 2015-16, the super guarantee gap is estimated to be $2.79 billion.
- Tobacco tax gap – for the 2015-16 year, the net tobacco tax gap is estimated to be $594 million (5.6%).
- Wine equalisation tax gap – in the 2015-16 WET estimate, the payable and refundable WET amounts were included to generate a net WET gap estimate. The net WET gap estimate for 2015-16 is $5 million (0.5%).
Agents contributing to small businesses getting it right
The ATO’s research shows that in 2015-16, small businesses voluntarily reported and paid 87.5% of the income tax that the ATO expected from them – around $76 billion.
“We recognise the important role that tax professionals have in helping small businesses get their tax right and we would not have been able to achieve this result without the support of our tax professionals”, Deputy Commissioner Deborah Jenkins said.
The ATO will take swift and strong action to deal with the small number of agents who deliberately contribute to the problem.
Black economy behaviour
The Black Economy Taskforce estimates that the black economy costs community as much as $50 billion, approximately 3% of Gross Domestic Product (GDP).
The black economy impact on the small business income tax gap is estimated to be around $7.7 billion, or 64% of the gap. This is primarily due to businesses deliberately hiding or under-reporting their income. To a lesser extent, it is also due to deliberately over-claiming business expenses.
“We’re implementing a number of initiatives to tackle the black economy. Changes like a ban on sales suppression software and a new tip off line where people can report suspected black economy behaviour to us”, Deputy Commissioner Deborah Jenkins said.
The ATO is also expanding their sophisticated data analytical tool that spots red flags indicating omitted income or other black economy conduct.
“We’ve stepped up our enforcement activities, including highly visible mobile strike teams. We visited close to 10,000 businesses around the country last year and we plan to visit another 30,000 over the next three years.”
Date of Issue: 30 August 2019 Author: Noé Vicca
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.