Our recent summary of the ATO Compliance Update 2010 highlights the ATO’s “Prevention rather than Cure” message.
Continuing improvements in technology have allowed the ATO to develop better strategies to enhance the belief that prevention is better than cure
New strategies allow prevention rather than cure
Continuing improvements in technology have allowed the ATO to develop better strategies to enhance the belief that prevention is better than cure.
This year the ATO’s focus will be on:
- using upgraded risk models to detect incorrect or fraudulent refund claims
- timely lodgement of BASs and the correct payment of employer obligations including superannuation
- using data matching from tax returns, other government agencies and various external sources across 500 million transactions for inpiduals, micro enterprises and SMEs
- benchmarking over 100 industries to deal with under reported or omitted income and cash transactions, including benchmarking over 100,000 micro enterprises
- wealthy Australians and non reporting of capital gain and other investment expenses
- the correct tax treatment of pidends paid by private companies
- phoenix arrangements and illegal access or release of superannuation
- working to counter the abusive use of tax secrecy havens
- following up the tax reporting of excisable goods
The ATO will help people get it right the first time, by:
- warning and following up those requiring extra care in tax return preparation
- giving people an opportunity to explain incomplete or incorrect returns
- Refund fraud: specialist technology to analyse income tax returns prior to refund issue
- High income inpiduals: employee share scheme income will be scrutinised, including overseas entities and payments from Australia to overseas accounts.
- Work related expenses: guides will be issued to assist engineers, mechanics, teachers and other specific occupations to claim their expenses correctly
- Tax agents: claims made outside the norm for the agent’s client base will be identified
Sophisticated profiling tools will identify micro businesses that:
- operate outside industry benchmarks or economic norms
- are at highest risk of not lodging returns or lodging returns late
- have undisclosed income or capital gains
- operate in the cash economy, by methods such as identifying people whose lifestyle cannot be supported by their reported income
- These activities alone will see the tax affairs of over 26,000 micro businesses reviewed and audited.
- Other identification areas include:
- Business activity statement (BAS) refund integrity: businesses and third parties will be contacted to substantiate over 48,200 refund claims from micro enterprises
- Employer obligations: anticipated action will be taken on over 17,500 employee complaints about unpaid superannuation.
- Property assets and investments: increased focus on review and audit activities on:
- small business capital gains tax concession claims
- reporting capital gains and goods and services tax on the sale of shares and real property
- application of margin scheme rules
- non lodgement of tax returns and activity statements where a CGT event has occurred
- developers avoiding their payment obligations by not lodging their activity statements.
- Losses: Review of the tax affairs of businesses using losses to ensure that tax payable is not incorrectly reduced in current or future years
- Contractors: data matching from labour hire firms will identify and target contractors (particularly engineers, computer technology specialists and those identifying themselves as a personal services business) and businesses in receipt of government stimulus payments.
- Self managed superannuation funds: 10,800 self managed superannuation funds audits / reviews
SMALL TO MEDIUM ENTERPRISES
There will be a continued pursuit of legislative change to clarify the law where it is unclear, and the wealthy Australian program will be ramped up.
- Private groups: focus will continue on private groups and the tax compliance of the inpiduals controlling those groups and the entities within them.
- Wealthy Australians: approaches will,include risk reviews and auo assess wealth, targeting more than 360 risk reviews this year.
- Superannuation: data matching activities to identify employers at high risk of not meeting their obligations, including action on employee complaints about unpaid superannuation.
- International: focus profit shifting through understating income or overstating deduction via:
2. intra group loans
3. permanent establishments
4. intellectual property
5. traditional transfer pricing risks such as purchase or sale of goods or services.
- Capital gains tax (CGT): data matching from property sales, share disposals and income tax records and review of claims for rollover exemption and pre CGT status of share disposals. Monitoring the increased use of outbound phone and letter activities covering capital discrepancies in share and property sales
- Property: focus on taxpayers selling property and disengaging from the GST system by not lodging their BASs.
- Monitoring and reviews: Data matching and automated reviews of tax and accounting data. Compliance treatments will include:
- lodgement projects covering the applicability of capital losses
- specific reviews on issues including major transactions, small business CGT concessions, and pision 855
- audits escalated from any of the reviews mentioned above.
The magnitude of the government’s stimulus package has created the need to check for compliance issues regarding:
- updating contracts to shift transactions into the relevant investment time period
- changing dates on contracts to meet the requirements for the tax break deduction
- assets inappropriately classified as ‘new’
- inappropriately using a ‘start to construct’ date to fit into the relevant investment period
- claiming a deduction on assets such as aircraft and ships used principally outside Australia
- inappropriate financing arrangements to exploit the concession.
A SNAPSHOT OF ATO’S 2009–10 ACTIVITIES
The following activities were undertaken during this period:
- 335 compliance focused visits to tax agents undertaken.
- 760,600 inpiduals contacted to follow up their lodgement, raising liabilities of approximately $67 million.
- 17,700 complaints received from employees in relation to unpaid superannuation.
- Over 1,100 inpiduals audited who were involved with illegal access of superannuation benefits, raising over $8 million in liabilities.
- Around 110 calls received a day to the tax evasion hotline
- 6,852 audits, 2,010 outbound telephone reviews and 23,016 desk reviews of employers’ compliance with their pay as you go withholding, superannuation guarantee and fringe benefits tax obligations conducted, raising revenue of over $717 million.
See our October / November newsletter for the full summary, or contact us and we can send you a pdf copy.