The ATO believes around $5.2 billion in goods and services tax continues to be unaccounted for as it saw an over 20 per cent increase in GST revenue across the 2020-21 financial year.
ATO reveals $5.2bn in GST tax gap
The ATO has recently released the 2020-21 GST administration annual performance report with the net GST gap calculated for 2019-20, estimated to be around $5.2 billion or 7.8 per cent, resulting in the ATO receiving over 92 per cent of the GST revenue that was expected to be collected, the bulk of which was collected voluntarily.
“Overall, the GST system is operating well,” ATO small-business deputy commissioner Deborah Jenkins said. “This compares favourably with similar international tax jurisdictions.
“As the economy recovered from COVID-19 in 2020–21, the ATO raised $73.1 billion in GST cash collections. This was 4.7 per cent (or $3.3 billion) above the revised budget estimate and 21.3 per cent higher than in 2019–20.”
GST cash collections included $4.8 billion (net) from the Department of Home Affairs, $1.0 billion in GST for supplies of digital products and services, and low-value imported goods.
The Tax Office also raised $2.3 billion in liabilities through client engagement activities, including $1.1 billion from compliance and lodgement enforcement activities as part of the GST compliance program and $0.5 billion in compliance liabilities raised from high-risk refund casework.
Expenditure on GST administration for 2020-21 was $538.2 million, down 6.5 per cent from 2019-20, according to the ATO. The decrease in costs was a result of the ATO’s continued support of the COVID-19 stimulus measures in the first two quarters of the year.
“We will take a holistic approach to ensure the health of GST, which means it will use different strategies to encourage sustained voluntary compliance,” Ms Jenkins noted.
“While we address non-compliance through audits, audit amendments make up a small percentage of total GST collections.
“Fundamentally, the GST system relies on the vast majority of taxpayers engaging with the ATO as willing participants, so we are increasing our focus on assisting clients to get things right from the start.”
Focus areas to improve the GST system
Technology and data are increasingly driving improvements to the GST system, with the ATO leading the way as one of the most digitalised revenue authorities in the world, according to Ms Jenkins.
In the last 12 months, key ATO digital transformation milestones have positively impacted the administration of GST such as the establishment of the Australian Business Registry Services (ABRS) – a new service that will streamline how businesses interact with government and manage their registry obligations, providing one unified source of trusted business information.
Furthermore, this also includes replacing the ATO Business Portal with online services for business, making it easier for businesses of all sizes to manage their ATO obligations and delivering automation and new GST risk models under the contemporising GST risk models project providing efficiencies, better strike rates and increased revenue protection.
“The practical implications of using technology and data to drive voluntary compliance leads to significant improvements in tax performance,” Ms Jenkins explained.
“Those who are digitally engaged, particularly small businesses, are more likely to be successful in meeting their taxation obligations.”
The ATO observed that COVID-19 has also continued to present challenges, however, the impact has not been consistent across industry or location.
“Some businesses are recovering well, others are struggling, while some have experienced little change. In effect, this has created a multi-speed economy,” Ms Jenkins added.
“In this environment, different businesses require different support; a uniform or one-size-fits-all response from the ATO is not appropriate, so we have used discretion based on the circumstances.”
Throughout 2020-21, the ATO applied several administrative levers including deferrals of payments, quicker access to GST refunds and options to enter low-interest payment plans for existing or future tax debts.
“Our empathetic approaches were well received, providing a good foundation for relationships and compliance with clients into the future,” Ms Jenkins continued.
“We are committed to delivering an effective and efficient GST administration that delivers better experiences for our clients.”
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