Every year, the ATO tightens its grip on taxpayers, and this year is no different. In fact, in many ways, the ATO is actioning tougher scrutiny than ever on sole traders and small business, while also increasing its own access to and use of private information to ‘crack down’ on late payments or incorrect tax submissions.
The ATO is currently making debt collection a top priority, planning to intervene earlier and use firmer actions if businesses are not meeting their tax obligations. Furthermore, their data-matching platform now has access to a broad range of organisations, from Uber and Airbnb, to financial institutions and government agencies, to track whether taxpayers’ claims align with their actual financial transactions.
Sole traders should be wary
If any sole traders are feeling like the ATO has put a target on their backs without reaching out with a helping hand, you are likely not alone. Unfortunately, there is good reason to be alert as you prepare your tax return documentation this year.
For years, the ATO has talked about a “fully digitised” tax ecosystem whereby taxpayers can leverage a digital-first approach to tax returns that helps them fairly pay and receive what is owed on time.
However, we are yet to see this system in action.
The government has made heavy investments into digital tools and technologies that involve precise data-matching across multiple systems and technology platforms, and is also investing in a Digital ID system that will further increase its access to taxpayers’ personal information. All of these investments help to further the ATO’s agenda of catching ‘dodgy’ taxpayers, who are supposedly trying to ‘cheat’ the system or purposely avoid paying their debts.
Meanwhile, taxpayers are not seeing comparable investments being made in digital tools and technologies that help them navigate Australia’s complex tax system, particularly sole traders who often straddle the worlds of being both an employer and employee. Furthermore, the ATO’s ongoing changes to tax rules and expectations, and growing ‘crackdowns’ on sole traders and side hustlers, is adding more pressure on sole traders who are trying to do their taxes correctly.
Flip the script, use technology to your advantage
Many sole traders are time-poor and with an endless to-do list. Understandably, keeping track of receipts, expenses, and the overall P&L can take a backseat to delivering on their core business service or product. In fact, many would say financial and tax management can be a full-time job in itself. This is why leveraging digital tools specifically built for sole traders is important.
Using generic “business tools” can be costly and time-consuming. Generic digital tools will lead to generic outcomes, and most sole traders do not operate like an “average” business, nor will they have the budget to pay for tools that are not already tailored to their needs.
Rather than taking on the burden and costs of a business-focused technology product, sole traders should be looking for tools that:
- Work from live bank feeds to ensure nothing is ever lost, forgotten or faded.
- Provide real-time insights into their financial circumstances, preferable with the smarts to calculate your live tax position, including any other incomes you may have.
- Are designed specifically for sole traders, including automated small business depreciation offsets, vehicle logbooks and ability to manage any losses.
- Are low-cost, but don’t skimp on high-value insights that enable fast decisions.
- Continually update based on the ATO’s changing rules or expectations.
- Provide a full suite of tax reports and the ability to invite your accountant or advisors to enable real-time tax planning and collaboration.
At a time when the ATO is gaining greater control and visibility into sole traders’ businesses, it is only fair for sole traders to start gaining equal or more control and visibility into their own tax affairs. It is not always the first thing that comes to mind, but a hefty fine – or worse – could be what sets a sole trader back or puts them out of business. Get ahead and stay ahead of the ATO by leveraging the latest digital tools designed specifically for the sole trader hustlers.
