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December 8, 2016

ATO Annual Report


Why’s November such an exciting month?  Melbourne Cup?  6 weeks till Christmas?  Test cricket begins?  Not at all; it’s the month the ATO releases its Annual Report.

Titled “Commissioner of Taxation Annual Report 2015-16”, this year the report contains 2 volumes!  Twice the fun, you say?

Volume 1 has all the exciting bits such as “Delivering a Better Experience” and “Building Purposeful and Respectful Relationships”.  It also contains an outline of the ATO’s “Operational Performance” which details the quantum of taxes recovered, from which avenues and the rate of default, etc.  More detail on this is provided below.

Volume 2 essentially provides the Financial Statements for the ATO.  For instance, the cost of running the ATO (wages, rent, insurance, suppliers, etc) is $3.5 billion.  The ATO has $310 million invested in leasehold improvements and plant & equipment and $504 million invested in computer software.  The remainder of Volume 2 is relatively uninteresting.

Turning back to Volume 1, noted highlights for the 2016 financial year are:

Tax Recovery Performance

  • Total tax collected for the year was $343 billion, sadly $14 billion below Government expectations (nothing seems to be going right for Mr Turnbull). This is broken down as follows:
  1. Income tax                        $262 billion
  2. GST                                     $58 billion
  3. Excise and other                  $23 billion
  • On average, 18% of annual income tax returns were lodged late, with 22% of BAS returns lodged late;
  • 10% of tax was paid late or not at all;
  • The ATO is actively pursuing recovery of $19 billion in overdue tax;
  • The ATO agreed to 950,000 payment plans in the year, 17% more than the previous year; and
  • The ATO commenced 4,801 bankruptcies and wind-ups during the year, compared to 3,583 last year

Small Business

  • Up to 30 June 2016, a business with turnover of up to $2 million was defined as a small business.  This threshold increased to $10 million on 1 July 2016;
  • $13 billion of the $19 billion in overdue tax was owed by small business; and
  • 28% of small business tax liabilities are paid late

Other Snippets

  • Individuals with up to $100,000 in overdue tax can enter into a payment plan online;
  • The ATO stopped debt recovery action, granted payment arrangements and remitted interest for taxpayers affected by the Arrium collapse;
  • 3.8 million “Compliance Activities” (aka tax audits) netted $14 billion in extra tax;
  • The ATO spent $60 million on external legal fees and $29 million on internal legal fees; and
  • Tables 4.5 and 4.6 provide a brief summary of all significant and test-case litigation throughout the year

Take-home?

  • The ATO is becoming more and more significant in its tax recording, gathering and recovery systems;
  • It is using the soft approach to recover overdue taxes through payment plans;
  • At the same time, the ATO is coming down hard on defaulters who do not rectify when given the opportunity; and
  • Small business is still doing it tough

From last year, tax collected is down, unpaid tax is up, ATO initiated wind-ups and bankruptcies have increased and small business default on lodgements is up. Provides an interesting insight into how our current economy is travelling. The complete Annual Return can be found here. It contains only 250 pages.

Article written by David Stimpson, Executive Director, Queensland

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