With the Australian Tax Office (ATO) recently signaling their intentions to crack down on up to 90,000 small businesses over tax obligations over the next three months, it′s worth considering why.
A recent report by the Inspector-General of Taxation on tax debt collection revealed that about 75 percent of all outstanding business tax debt was from businesses with a turnover of between zero and $500,000. That′s very small business. So why does so much of the tax debt belong to them?
One consideration is that perhaps small business owners aren′t fully aware of their tax obligations and/or don′t know how to properly abide by the tax system.
Tax Commissioner Chris Jordan recently spoke about this at the annual National Small Business Summit –reporting the feedback of thousands of small business owners across the country on the Tax Office′s directions, products and services. This feedback was generated through many consultations conducted by the ATO over the past year.
Four things the ATO could do to help small businesses
Mr Jordan said the small business sector responded to the consultations with some pretty clear messages. As outlined by Taxpayers Australia, Mr Jordan spoke of four main areas of concern:
- Fix the basics and make it easy: “You are sick of trying to find the right information on our website to answer a question, looking at dense and out-of-date documents,” Mr Jordan said. “For such a commonly occurring event, we had no easily accessible information available for the majority of people to use.” So, small businesses want the ATO to make their website more user-friendly, with more information available.
- It needs to understand small business′s circumstances, and tailor services and interactions: “Why aren′t we using the information we have to better target who gets what services and attention, to make something that really works for you, freeing you up to get on with business?” The ATO should look at things more often from the perspective of the small business owner to make their systems/services more customised to different needs.
- Help with complexity: “We need to help you with the right tools and information when you need them in a way that suits you,” Mr Jordan said, “and we need to be working across government so your services are integrated and simplified.” Although the tax system is naturally complex, the ATO can make its services simpler, and the Commissioner seems to agree.
- Administer the system fairly: “You want to know we are targeting our activities appropriately and effectively so that everyone is paying the right amount and that there is a level playing field,” Mr Jordan said. “This is essential to trust and confidence in the ATO and the system.” Small businesses generally want to feel that taxation is being carried out in a more reasonable manner, so the ATO needs to address this.
Taxpayers Australia Case Studies
Members of Taxpayers Australia shared some interesting personal perspectives on the Taxpayers Australia website illustrating the problems small business owners have with the ATO.
Matt Swanson, who runs an ICT consulting firm called Semvac Pty Ltd in the Northern Territory, said he encountered issues with the ATO′s communications.
“I found that keeping track of when things are due was an issue,” he said.
“I went for several years running around in circles – I even got a penalty, although they did waive that when I explained.”
Chief Financial Officer of South Australian portable building solutions supplier Northern Transportables, Kelly McCoy, also encountered communication issues with the ATO.
Kelly recently attended a seminar on SuperStream implementation for small business at which there were two Tax Office representatives she was not impressed with.
“At this seminar, the questions being asked came from mums and dads and business owners who did not have the accounting backgrounds required to understand an unexplained answer,” she said.
“The two Tax Office reps did not answer one question completely, they did not explain how to achieve outcomes based on what they were telling people had to be implemented, nor could they give practical examples to explain how things worked.
“After implementing the system numerous times, it was extremely frustrating (for me) to know the answers to most of the questions that were asked, only to hear such poorly portrayed responses.”
Although there does appear to exists problems in the system of taxing small businesses, at least the ATO is admitting that there are faults. With the recent discussions and consultations the ATO is having with small business owners, there can only be improvements to the system in the future.