Australia’s Commissioner of Taxation Chris Jordan is on a mission to make small business owners’ interactions with the taxation office like visiting the dentist.
Recalling a conversation he had with his wife when he first started in his role, Jordan told the Council of Small Business of Australia’s National Small Business Summit on Thursday afternoon that for many people, visiting the dentist is something “you never really want to do … but you know at some point you have to”.
And it’s the same feeling most taxpayers, including small businesses, have when it comes to dealing with the Australian Taxation Office.
Therefore, the challenge for the ATO is to “make dealings with the tax office infrequent, quick and painless”, said Jordan.
Jordan said the ATO has a choice “to make things easier” for the businesses it interacts with and the tax office and the small business community share a common goal of making the experiences of all small businesses better.
“We can choose to make things easier if we really try,” he told the summit.
“And we can choose to declutter our processes to remove unnecessary processes that don’t really have any useful or major outcomes.
“We can take a more reasonable approach to risk management and hopefully focus on what matters most rather than getting caught up on insignificant or trivial details or process.”
Speaking to an audience of business owners, association members and other government regulators, Jordan said it’s about the ATO adopting the right mindset.
“So we can choose the mindset of which we approach our jobs and choose to work together more effectively as regulators,” he said.
“And we can choose to genuinely try to help viable small business not just to survive, but hopefully to thrive.”
A “refreshed” approach
The ATO’s relationship with small businesses across the country has repeatedly come under scrutiny over the past 18 months, as continued outages of its online services have taken a toll on SMEs and their advisors, and prompted members of the business community to call for compensation and system improvements.
Meanwhile, some commentators have criticised the ATO’s approach to enforcement action against ‘mum and dad’ operators who use trusts or partnerships to run their businesses.
But Jordan took issue with what he calls “sensational headlines” and “unfounded” reports that paint a picture of an adversarial relationship between the ATO and small businesses.
“I can assure you I’m driving a small business-friendly ATO,” he said.
“Our intent is to support viable and honest small businesses to thrive and to tackle the behaviour of those who do not do the right thing, and who may gain an unfair advantage through shortcuts or simply non-compliance.”
Jordan hit out at what he called myths about the ATO being “the enemy of small business” or an organisation that is “attacking vulnerable small businesses”.
While he acknowledged that “not everyone in the past felt we were approachable and reasonable”, he said he is doing all that he can to “make sure those days are behind us”.
“At the ATO, we have very much refreshed our approach generally, and in particular to small business. We have decluttered our processes, we have removed somewhat mindless processes,” he said.
“We have focused … on serving the majority, the majority of people who actually try to do the right thing. And we have changed some of our priorities and our goals, changed a number of our services. We have made changes to our culture and importantly, all the way through this, we’ve consulted extensively will small businesses … to understand what they want.”
Jordan said for too long, the ATO would develop ideas and services for small businesses without consultation, only to have business operators “totally underwhelmed” when presented with the offerings.
“So a big part of what I’ve tried to achieve is to have my people stand in the shoes of our clients. Put yourself in their shoes, understand what they want, talk to them, get out of the office … so that you provide things to them that they want, not what you think they may want,” he explained.
“If we can make a positive difference to the way we work with small businesses, we will do much to help the social and economic wellbeing of Australia and Australians, which is the mission of the ATO.”
As evidence for how the ATO is adopting a “friendlier and more streamlined” approach to small businesses, Jordan said the ATO has increased the volume of Australian Business Number (ABN) registrations that are granted immediately online, from 68% three years ago to 92% today.
He said the ATO enters into approximately 950,000 payment arrangements with businesses each year and 70% of those, or more than 650,000, are for small businesses.
The ATO has also increased the maximum amount for payment plans that can be entered into over the phone, from $25,000 to $100,000, and sole traders now have the ability to apply online for payment plans for debts up to $100,000.
There has also been a focus on early engagement and dispute resolution, said Jordan, and for every successful in-house facilitation, taxpayers save an average of $50,000 that would have otherwise been spent on litigation.
Small businesses account for more than 50% of the settlements the ATO reaches and have the highest representation for settlements among all of the ATO’s client groups, according to Jordan.
Some 5.3 million words have been stripped from the ATO’s website to make the information on the site more “approachable and reasonable”, said Jordan.
The ATO’s hit list
But while Jordan was emphatic that the ATO will support business operators who are doing the right thing, he said small businesses have told the tax office they want action to be taken against those who are not doing what they should.
“So in the coming year we will be very publicly targeting people with: a lack of or inconsistent record-keeping; personal expenses described as business expenses (family car, family holidays, school fees); and incorrect use of loan accounts,” Jordan said.
Operators who are “constantly borrowing from the business but never paying back [and] practically living off the business” will also be in the tax office’s crosshairs, as will those who have a “mis-match between BAS information and the income tax return; those businesses who continue to trade even though they are insolvent, and of course those involved in the black economy, so businesses that may deal with cash only”.
“I want to stress that we will be supportive to those trying to do the right thing and we will only escalate to enforcement action when other approaches don’t work or there is an established pattern of non-compliance,” Jordan said.