“Imagine the possible”: ATO commissioner envisions BAS-free future for small business

Outgoing Australian Taxation Office (ATO) commissioner Chris Jordan has reaffirmed the office’s commitment to a fully digital tax system, asking taxpayers to imagine a potentially “BAS-free” future for small businesses.

In a speech that thanked small businesses compliant with today’s tax rules — and underlined the ATO’s enhanced focus on debt collections — Jordan on Thursday reiterated his long-running hopes for tax modernisation.

Jordan, who will depart the role in February next year, said the ATO is hoping to implement the OECD’s Tax Administration 3.0 playbook by 2030.

Tax 1.0 broadly reflects tax which is both reported and paid after the taxable event, while today’s tax system is closer to Tax 2.0, where reporting takes place instantly through systems like single-touch payroll.

Tax 3.0 imagines a world where reporting and payment of tax occur at the same instant.

The ATO is now imagining “seamless, integrated, and automated systems” that will allow “data to flow from taxpayers natural systems, to ours, without any extra effort or intervention from them,” Jordan said.

This “digital first” approach will help small businesses “minimise errors, increase confidence and promote right-time reporting and payment”.

“This improves small business tax performance.”

The exact shape of Australia’s Tax 3.0 system is yet to be defined, but Jordan said the ATO is considering the possibility of a “‘BAS-free’ future”.

That goal is not science fiction, Jordan said, with the tax office choosing to only “imagine the possible” and contemplate how its existing systems could be updated to facilitate real-time taxation.

Real-time reporting and payment a long-term goal

Last week’s speech was not the first time Jordan has shared his big-picture thinking about the future of tax, and how small businesses could benefit.

In a September 2022 speech, Jordan called for attendees to imagine a world “where businesses no longer need to do monthly or quarterly GST reporting”.

“If digital systems can bring together point-of-sale, banking and eInvoicing data at the time of purchase or sale, can their systems report the GST paid or collected to the ATO in real-time too?”

Elsewhere, the federal government is also pushing ahead with its plan to enact payday superannuation, ensuring businesses pay the required superannuation guarantee every time an employee is paid.

Payday superannuation is expected to arrive in 2026.

Digitisation efforts to improve SME performance

The ATO is not chasing Tax 3.0 for time-saving benefits alone, but to ensure businesses, and particularly small businesses, remain compliant with their tax obligations.

In the Thursday speech, Jordan outlined how the majority of $50 billion in collectable debt is held by the small business sector.

With Tax 3.0 and the end of BAS both futuristic goals, the ATO is turning to old-school measures to ensure compliance today.

It has recently issued 31,000 Director Penalty Notices, and alerted credit bureaus to more than 10,000 debts over $100,000, Jordan said.

“You will have also seen we have increased firmer action for unpaid super,” he added.

“In 2022-23 we issued more than 134,000 reminders and prompts to clients with super debts, returning almost $700 million to Australians’ retirement savings.”

Jordan thanked the majority of small businesses that do the right thing and pointed to the failure to lodge penalty amnesty as a way for SMEs to confess their debts without facing an extra financial hit.

But, “for those unwilling to work with us, we will take strong and deliberate action,” Jordan said.

Jordan’s term as commissioner of taxation ends on February 29 next year.