Taxing tyrants need to back off on small businesses

My latest article in The Daily Telegraph defending the small business sector against the aggressive tactics of the ATO.

Australia’s small business operators, your local café owners, tradies, and start-up founders are the backbone of our economy. They employ over five million Australians, contribute more than $500 billion to the economy annually, and play a critical role in sustaining jobs, innovation, and local communities.

During the pandemic, the ATO was lauded for its leniency and its emphasis on flexibility. But those days are gone. In recent months, we’ve seen a surge in Director Penalty Notices being issued letters that carry with them serious legal consequences for unpaid debts. More than 3,500 small businesses have been shifted from quarterly to monthly Business Activity Statement reporting, many of them having operated compliantly for years. And there’s a growing, targeted crackdown on industries like construction, hospitality, and hairdressing sectors the ATO seems to believe are riddled with tax avoidance.

It’s essential to be clear: no one is arguing against tax fairness. Of course, everyone should pay their share. But this sweeping crackdown, this quiet war on small businesses, ignores the reality that most are already doing their best to comply. For them, monthly reporting isn’t a solution it’s a sentence. It means more paperwork, less time earning, higher accountant fees, and greater stress. Imagine a local café owner now having to spend hours every month reconciling BAS figures just to stay out of trouble, while juggling rent increases, supply chain chaos, and rising wages.

One business owner recently shared their story with me, someone who runs both a construction company and a consulting firm. Last financial year alone, they paid $500,000 in BAS and PAYG, and $50,000 annually in WorkCover for 12 staff. These are not faceless corporations. These are real people building businesses, hiring staff, and keeping the wheels of the economy turning. Yet they watch their clients spiral into hundreds of thousands of dollars in ATO debt, with little to no support or education on how to deal with it because they can’t afford the expert guidance of an accountant.

This same business owner asked a crucial question: where is the ATO’s duty of care? Why isn’t there a mandatory education component before someone can register an ABN or ACN? A 'business education' webpage hidden in the digital wilderness is not good enough. If she, as an employer, had such a minimal standard of education and accountability for her staff, she’d be accused of negligence. So why is it acceptable for the ATO and government to treat financial literacy and system navigation as optional extras?

Another case was even more devastating. A builder from Sydney shared how, after breaking his leg and being off work for nine months in 2023, he fell behind on his ATO obligations. His tax debt reached just over $100,000. When he contacted the ATO to arrange a payment plan, he was told to pay 50% upfront or there would be no deal. He explained he simply couldn’t afford that, he just needed time. The response? His case was “escalated.” Six weeks later, the ATO wound up his company and shut down its bank account. His proposed plan would have paid the debt off within 12 months. Instead, the business was destroyed and six employees, all supporting families, were left jobless overnight.

These are not exceptions. They are the canaries in the coal mine, warning us of a system that has lost perspective. The ATO justifies its approach by pointing to a tax gap of around 12 to 13 percent estimated to be worth $17 to $20 billion. But punishing compliant businesses won’t close that gap. In fact, this approach may backfire. If you make the system harder to navigate and more expensive to comply with, some businesses will give up entirely. Others may shift into the cash economy, the very behaviour the ATO is trying to stamp out. And many will simply fold under the weight of mounting obligations, taking jobs, income, and community activity with them.

There’s a smarter way forward. Instead of blanket mandates, the ATO should be applying these rules based on actual risk, targeting repeat offenders, not blanketing the entire sector with new demands. It should be extending support tools and amnesties, making it easier to comply rather than harder. And it should be adjusting outdated thresholds to reflect inflation, ensuring that reporting requirements are fair and proportionate.

At a time when small business confidence is already fragile, the ATO’s aggressive crackdown isn’t just tone-deaf, it’s dangerous. This quiet war on small business isn’t about compliance. It’s about control.

We can’t keep claiming to value entrepreneurs while letting institutions crush them under the weight of bureaucracy. Yes, taxes must be collected. But destroying the very people who create the jobs, drive the economy, and build our communities? That’s not enforcement. That’s economic vandalism.