ATO to “shift the dial” back to traditional compliance activities, but will still support small businesses doing it tough

The Australian Taxation Office is turning its attention back to “more traditional activities” in its dealings with small businesses, including by recommencing audits, but says it remains committed to helping support business owners who are still dealing with the challenges of COVID-19. 

In a speech to members of Chartered Accountants Australia and New Zealand last week, Deborah Jenkins, ATO deputy commissioner for small business, spoke about how the ATO has approached the coronavirus pandemic, including by moving “several thousand” employees to work on processing stimulus payments instead of regular compliance work. 

However, Jenkins said it is now time for the ATO to “shift the dial back to more traditional activities”, while continuing to offer individualised support to businesses that need it. 

As the tax office now begins implementing key measures included in the federal budget, such as the expanded asset write-off scheme and loss carry-back provisions, Jenkins said the ATO will be “continuing to balance our role in supporting taxpayers through this very challenging time with recommencing our work to address key risks to the tax and super system”. 

“We want to keep building confidence by supporting small businesses when they need it, but we need to start shifting the focus back to ensuring good compliance for the health of the system,” she said. 

Audits recommence 

This shift in focus means audits of small businesses have now recommenced, while work is underway on new compliance measures too. 

Small businesses that were being audited by the ATO when the pandemic hit initially had their engagements with the tax office deferred, first until the end of May and then until the end of August, however, this approach has now changed, explained Jenkins. 

“Since 1 September, we have stopped providing blanket extensions to small business audit cases and we have recommenced activity where the client is either not adversely impacted by COVID or is now in a position to progress,” she said. 

The ATO has also now started new audit work, said Jenkins, but is “very aware that we need to sensitively balance the ongoing impacts with our role as a revenue authority”. 

“I want to emphasise that we will continue to be empathetic to each client’s situation and provide additional time if they need it,” she added. 

It is not straightforward to determine which businesses are still affected by the pandemic, said Jenkins, and this is why the ATO needs to “return to a normal setting for our work program”. 

“It’s not as simple as applying postcode logic — for obvious reasons. In bushfires, we can use this approach to support impacted businesses.” 

Review and audit programs to address black economy activity will also recommence soon, said Jenkins, with a particular focus on contractors. 

The ATO will use data from its Taxable Payments Reporting System (TPRS) to check if contractors are meeting their income tax and GST requirements, and it has been trialling a ‘nudge’ system where taxpayers are contacted ahead of filing their tax returns to remind them to include TPRS reported income. 

From November 2020, the ATO will be contacting tax agents and businesses in the cleaning, courier and building and construction industries that may not have included their full income in their 2019 tax returns. 

Jenkins said the tax office has offered industry-specific education and support over the past few months, as well as identifying key areas where businesses may need additional help, including with recording business losses, disposing of assets, and claiming home office expenses.

Officials have also started contacting businesses with outstanding payments or lodgements to “remind them of their obligations”. 

“We know we need to provide the right help at this time to ensure people understand their obligations and are steered in the right direction to address unintentional mistakes,” she said. 

“But we also need to hold people to account who are intentionally doing the wrong thing.”

Businesses to ‘stay in the system’

While Jenkins said the ATO will keep working with small businesses that are still unable to pay their tax, she stressed the importance of businesses continuing to make their lodgements with the ATO, even if they can’t immediately pay the amount owed. 

“Of course if they can pay, they should,” she said. 

“But staying in the system and meeting lodgment obligations will make things a lot easier for businesses as they come out of the pandemic — they will know their true financial position, will have kept good records and … not staying up to date with your obligations may impact on eligibility for future stimulus measures.”

This system will receive an upgrade in 2021, with Jenkins also outlining plans to roll-out a new service called Online Services for Business, which will replace the current business portal and electronic superannuation audit tool, or eSAT. 

“Online Services for Business has undergone extensive user testing, and a small private beta is currently underway, which is a helpful way for us to tinker with the design to make it as good as we can before we got to the public beta phase,” said Jenkins. 

Improving digital systems and increasingly using data when engaging with businesses is part of a wider plan to “make it as easy as possible for businesses to recover”, said Jenkins. 

“It is in all our interest, whether a business, a business advisor, or revenue authority or the community as a whole, for businesses to be successful,” she said.