The tax office is stepping up law enforcement over tax evasion with small business is firmly in its sights. And this is dangerously dampening business confidence, writes Paul Rattray.
It’s been a testing year for small businesses… Starting with the uncertainty created by the Federal Election, hot on the heels of the final report of the Royal Commission into Finance and Banking (which seemed to make lenders more cautious), followed by headline-grabbing threats from the Australian Tax Office in time for returns to be lodged, all against a global backdrop that’s been far from completely stable.
And none of this has done much to boost small business confidence.
The tax office says Australia’s small business community failed to pay $11.1 billion in income tax obligations through 2015-16. What’s important to note here, is that approximately $7 billion of this is tied to the black economy.
These numbers are part of research conducted by the ATO and they confirm, loud and clear, what we have long known: That most small businesses in Australia aim to do the right thing and pay their tax obligations in full, and on time.
In fact, 90% of income tax paid by small businesses is contributed voluntarily.
Increasingly, the ATO is using a range of technologies such as sophisticated analytics software and data-matching as well as extensive research into small business owners’ social media profiles all of which are providing useful insights to catch tax cheats.
It would be fair to say that we all want the cheaters caught. We know the black economy is a bad thing. But what we don’t need, is the current scare mongering…. PR from the ATO that tell us that mobile “strike teams” are being deployed, that late tax lodgements may make some deductions invalid, or that the ATO’s commitment to conducting small business audits will be increasing.
Because we already know that most small businesses are doing the right thing. And if they’re not, in most cases, it is not intentional.
In the past 12-24 months the ATO has introduced a range of new tax rules and obligations, such as STP reporting and Director IDs for example, which has been pretty onerous for small business. Not only is there a time cost, but there is a financial cost too. And the implementation of new systems and procedures in order to remain compliant with regulators can also cause a significant disruption to day-to-day business activity.
Small Businesses contribute greatly to our economy. SMEs account for more than half – 57% – of Australia’s GDP, and are responsible for creating 7 million jobs.
SMEs need to be recognised for the value they provide to this country. They are a vital cog in the economic wheel, juggling a myriad of responsibilities and are aiming to meet all of their obligations to staff, customers, shareholders, industry regulators and the ATO.
At ATB Partners, we know the challenges SMEs face and we’ve built a specialist team with a depth and breadth of knowledge to help small businesses to thrive in this increasingly fast-paced and competitive environment.
We have a range of free resources on our website, and if we can help you further, with your business accounting, with taxation, with business mentoring, strategy, structure, financial planning, SMSF planning, or whatever it is your small business needs, then please, contact us.