Simple mistakes costing small businesses a $15bn tax gap

The ATO is looking to improve the tax advice process in order to close the $15bn small business tax gap. Jeremy Hirschhorn, the ATO second commissioner, says that the tax gap is due to just simple errors and accounts for nearly half of the total shortfall.

It has been calculated that the Tax Office in the 2018-2019 year was operating at around 93% tax performance. 91% was seen at lodgement and a further 2% through compliance actions. 

This 2% equaled roughly $10bn and left a gap that was estimated to be $33.5bn.

The ATO saw that there were a lot of businesses that were making simple mistakes due to poorly managed systems or simply bad advice. Getting taxes right can be hard because it is not always black and white. That is why you need to have advisors at your side who are competent and confident in what they do. 

Accounting Tax Solutions ensure that their clients sit at a sweet spot between not acting overly aggressive or overly conservative. We work tirelessly and use experience and knowledge to our advantage to get this delicate balance right. 

We want to avoid paying more tax than is necessary whilst ensuring that an individual does not raise suspicion and attract attention from the ATO. This is a mastered skill that only years of successful tax advising and practising can provide. 

With the ATO clarifying the tax advice process, this will make their stance on claims and disputes more readily understood. We can then more confidently make decisions together, taking a lot of potential uncertainty out of tax time. This will allow more time for the simpler things to be done properly and can reduce that painfully large shortfall that we are all experiencing. 

The ATO does not expect us to be conservative, so their approach to provide more certainty, engage early and to minimise the risk of errors is going to work in favour of those who are paying tax.

Should the ATO become more transparent with their expectations and viewpoint on how the system works, then this will surely ensure that less costly and simple mistakes are made and that there is a reduced risk for individuals to get caught up in a dispute with the ATO. 

Make sure you talk with your tax advisor here at Accounting Tax Solutions to ensure that you are confident with your financial wellbeing and with how you are interacting with the ATO. Call us today on 07 5559 1200