ATO Targets Simpler Tax Returns for Australian Small Businesses
Synopsis
Commissioner Rob Heferen says the tax office wants business tax filings to be as straightforward as personal returns while reducing the gap between tax owed and tax paid.
The Australian Taxation Office (ATO) is seeking to make ATO small business tax returns simpler to deliver, and Tax Commissioner Rob Heferen is hopeful that over time this process will become as easy as filling out individual income tax returns.
The proposal seeks to decrease compliance costs for small businesses and increase the accuracy of reporting tax payments and eliminate tax evasion.
The plan is based on the existing digital service that is available to sole traders to report their business income and expenses in their personal tax return, using the ATO's myTax digital service.
Companies and trusts still have to provide greater detail in their reporting, such as separate tax returns, depreciation schedules, profit distributions and Pay As You Go (PAYG) installment tax returns.
Focus Turns to Simpler Business Tax Reporting
The ATO said simplifying ATO small business tax returns is one of a series of steps it was taking to improve tax returns processes, but not to impose new tax burdens. The agency has singled out record keeping and reporting problems as areas with potential for relief from compliance burdens for businesses.
The gross small business income tax gap in 2022–23 was estimated to be $17.7 billion, and is expected to have been reduced to $11.2 billion by compliance activities.
The voluntary compliance rate is estimated at 85.6% and errors in record-keeping and incorrect claims and underreporting of income is estimated to be responsible for around 40% of the tax gap.
Small Businesses Remain Central to Australia's Economy
Australia's business community will be impacted by the proposal. According to the Australian Bureau of Statistics (ABS), there were 2.66 million businesses actively operating in 2024 (as of 30 June 2024); and the vast majority of businesses were small businesses.
The ATO's process mirrors a trend toward electronic tax administration around the world. The Organisation for Economic Co-operation and Development (OECD), in its 2025 report Towards Seamless Taxation: Supporting SMEs to Get Tax Right, stated that tax authorities in other countries, such as New Zealand, United Kingdom, the Netherlands, Denmark and Singapore. These are are increasingly adopting digital reporting, pre-filled tax information and integrated accounting systems to ease tax compliance for SMEs.
Australian businesses, such as foreign businesses doing business in Australia, are being targeted by the proposed changes, which are indicative of further investment in digital tax administration to streamline and enhance tax reporting for small businesses by the ATO. The ATO hasn't given a date for any wider reporting changes.
Source: Smart Company
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
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