What challenges are small businesses facing?
A: In talking with the profession, it is clear we all recognise the complexity of the system is a challenge for many small businesses and the importance of the work we are doing to build a future digital tax ecosystem and creating an easier and more seamless experience.
Q: The ATO is focused on small business tax compliance. How are you addressing the shadow economy?
A: We do not tolerate those who operate outside the tax system, and with this in mind, our immediate focus is on ensuring drivers in the ride-sourcing sector are aware of and meeting their obligations. In addressing this behaviour, we aim to better protect small businesses from unfair competition from those who deliberately operate in the shadow economy, including taking action against businesses who deliberately liquidate to avoid paying employees and creditors.
Q: What role does the community play in tax compliance?
A: The community is tipping-off the ATO about taxpayers not declaring income, demanding cash from customers, paying workers in cash to avoid paying tax and super, not reporting sales, and where someone’s lifestyle doesn’t appear to match their income. The consistent number of tip-offs we receive tell us that Australians have had enough of taxpayers not doing the right thing. Australians recognise that dodging tax obligations is not fair, and they want to ensure there is a level playing field, without unfair competition from those not meeting their tax obligations.Â
Q: How are you helping small businesses comply?
A: In January this year, as part of our ongoing commitment to supporting small businesses, we launched the Essentials to strengthen your small business website. This free training resource has over 30 short courses to help small businesses develop the skills and knowledge they need to get their obligations right from the start. Over 125,000 small business owners have accessed the courses and there have been more than 500,000 views of our learning material.
Q: Small businesses face many challenges, including how to differentiate between an employee and a contractor. How is the ATO approaching workforce classification?
A: The ATO has published a practical compliance guideline (PCG 2023/2) that outlines when we consider worker classification arrangements to be high risk or low risk, and the consequences of that rating. This allows a business to take steps to ensure that the arrangements that they have with workers will be considered low risk by the ATO.
The employee-contractor decision tool was heavily dependent on the users’ interpretation of the facts of their situation. It was concluded, after much consultation with stakeholders, that a decision tool could not give appropriate answers for this complex area.
We encourage small businesses to talk to their registered tax professional if they’re unsure whether their worker should be classified as an employee or contractor.
Q: How are you supporting the sector with the changes to superannuation contributions?
A: We have and will continue to engage with small business representatives on Payday Super through various consultation and working groups and are listening closely to all feedback.
Recent improvements in payroll software solutions provide employers with cost-effective options for paying superannuation contributions accurately and timely. We know 80% of small businesses actively using the Small Business Superannuation Clearing House are also using a single-touch payroll software solution that offers a clearing house service for superannuation contributions.
We will engage with small businesses prior to the clearing house closing to advise them of the importance of transitioning to a commercial alternative that is fit-for-purpose for Payday Super.
From the start of the measure, employers will be required to pay their employees’ super guarantee on payday. If contributions are not received by their employee’s superannuation fund within 7 days of payday, they will be liable for the super guarantee charge. This 7-day period allows time for funds to transfer throughout the system and be received by funds.
Q: You say the ATO is more than revenue collection. What is your broader mission?
A: As a revenue collection agency, our objective is to optimise the collection of tax in accordance with the law to secure revenue that supports the economic and social wellbeing of all Australians, which the community expects us to do. We take seriously the role we have in ensuring all genuine small businesses get a ‘fair go’ through actively addressing those who opportunistically or purposefully look to gain an unfair advantage.
Q: Small businesses are doing it tough. How are you helping them navigate compliance amid challenging trading conditions?
A: We published a draft practical compliance guideline (PCG) on personal services businesses because we were concerned there is a persistent but incorrect view that part IVA cannot apply to income splitting or profit retention schemes where you have a personal services business being conducted through a personal services entity.
We are, however, aware of concerns about the PCG, in particular that the low-risk situation examples provided limited guidance. In finalising the PCG and in response to feedback, we are considering expanding on what we consider to be low risk situations and including more examples, particularly where there may be a retention of profits for reasonable commercial purposes. Although the formal consultation period is over, we continue to welcome insights on what other situations might be lower risk before we finalise the PCG.   
Q: What is the ‘Getting it right’ quarterly campaign?
A: We are providing transparency about the areas we are concerned where small businesses are getting it wrong, making mistakes, or engaging in opportunistic or deliberate behaviours. This provides the opportunity for accountants to work with their small business clients to review their affairs and, where necessary, get them in order. Our ‘Getting it right’ quarterly campaign aims to support small businesses to do just that – get it right from the start.
We have learning and support products for small businesses to help them improve their tax and super knowledge, and establish good business habits to give them the best chance of success. The courses cover a range of everyday scenarios and provide practical actions to prevent many of the mistakes we often see made.
Q: What final message do you have for small businesses?
A: We take seriously the role we have in ensuring all genuine small businesses get a ‘fair go’ through actively addressing those who opportunistically or purposefully look to gain an unfair advantage. We are committed to continually investing in help and support for small businesses to ensure they understand and can meet their tax and superannuation obligations.
Read more from ATO Deputy Commissioner Will Day at IPA’s National Congress 2024 here.
