New figures released by the Australian Taxation Office (ATO) estimate that almost 90% of income tax from small businesses is paid voluntarily or with little intervention from the ATO.

The figures also show the 2015-16 income tax gap for the small business sector to be approximately 12.5%, or $11.1 billion, with over $7 billion (or over 64% of the total value of the gap) being attributed to black economy behaviour.

Small business tax gaps that have been released overseas range from 9% to 30%.

“This shows that the vast majority of small businesses in the tax system are trying to do the right thing,” Deputy Commissioner Deborah Jenkins said in a press release.

“Small businesses make up more than 99% of all Australian businesses. They contribute $380 billion to the economy each year and employ around five million people”, Ms Jenkins said.

“Considering how much small businesses have on their plate, we’re grateful for the level of work they put in to get their tax right.”

Around 90% of small businesses use a registered tax professional to help them comply with their income tax obligations.

The ATO’s small business income tax gap estimate for 2015–16 is based on a sample of 1,398 taxpayers. The agency is working to build a bundled sample of over 2,000 random enquiries. Further findings on small business income tax gap is available here.

The ATO also measures tax performance across all market segments. They are available here.

Further reading

Mind the (Tax) Gap—It’s Bigger Than You Probably Think!, by Richard Highfield (5 February 2019)


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