Employers who fail to meet their tax obligations, medium-sized businesses whose tax performance is out of line with their economic performance, and self-managed super funds are among those identified for increased attention from the Tax Office this year.
Tax Commissioner Michael Carmody says the latest compliance program builds on the work the ATO has done previously as well as identifying some particular areas of concern where it will be stepping up its activities.
"While the vast majority of people do the right thing, we will continue to target those who fail to meet their obligations, as well as identifying areas of emerging risk," he says.
"This year we are increasing our focus on employers who fail to meet obligations such as pay-as-you-go withholding, superannuation guarantee payments for their employees, and fringe benefits tax.
"We will investigate all cases where employees tell us their employer is not making superannuation payments on their behalf."
Large businesses and high-wealth individuals will continue to be the subject of intensive risk reviews.
"Of the $6.4 billion raised in liabilities from our compliance work last year, more than half of this was raised from large businesses and high-wealth individuals, and we will continue our focus on these groups this year," he says.
Medium-sized businesses - those with turnovers of $50 million or more - will also face increased scrutiny.
"We have identified some medium-sized businesses who have declared profits over a number of years but appear to have paid little or no income tax, and we will be taking a closer look at this behaviour," Carmody adds.
Capital gains tax and rental deductions have also been identified as major issues for individuals in the property market.
"We are improving our education products to help people understand capital gains tax and rental deductions while at the same time increasing our audit activity of high-risk refunds in this area," he says.
"Last year a significant number of people lodged high levels of work-related expenses through their tax agent.
"While we continue to focus on work-related expenses generally, we will also increase our focus on the small but significant number of tax agents whose clients are at a high risk of over-claiming."
This is the third year the Tax Office has published the Compliance Program. This year the document includes a comparison of the 2003/04 results with the previous year.
"We want to let people know the risks to our revenue system and what we are doing to address them. By telling people what will attract our attention I hope to influence the decisions people make when they set out to meet their tax obligations," Carmody says.
In particular, Carmody says the ATO will target small to medium-sized enterprises by:
Employer obligations
- investigating each case where an employee claims their employer has not paid the proper amount of superannuation on their behalf
- conducting 1,900 phone enquiries and around 2,400 field reviews
- conducting 200 reviews of eligible termination payments to ensure they have been properly reported.
Large one-off or unusual transactions
- reviewing 700 cases through fieldwork and issuing 1,500 letters to businesses that have disposed of assets.
Large omissions of GST and incorrect input tax credit claims
- auditing 130 businesses suspected of failing to report and pay large amounts of GST, where a business is claiming false or unsubstantiated input tax credits or where there are artificial arrangements.
Incorrect claiming of tax refunds
- checking 13,000 GST input tax credit refunds, 11,900 by phone and 1,100 through field audits
- checking about 3,700 income tax returns to request that seemingly excessive claims are substantiated.
Property, building and construction industry
- increasing the focus on businesses with a turnover of up to $100 million
- conducting about 540 reviews to examine all tax obligations, including the overall tax being paid and superannuation obligations
- examining another 300 cases involving non-compliance with GST obligations.
Cash economy
- continuing its cash economy work, particularly among businesses in the $2 million to $10 million income range
- for this group, the ATO expects to undertake around 900 field audits this year, looking at income tax, GST, PAYG withholding and superannuation guarantee issues.
Other specific income tax and GST issues
- conducting about 1,600 income tax reviews and about 100 GST reviews of businesses with a turnover of more than $20 million.
Superannuation fund obligations
- reviewing about 200 funds this year to focus on income tax compliance issues
- reviewing another 200 funds to check that eligible termination payments reported in tax returns were properly reported when paid by the funds.
International tax issues
- conducting about 100 risk reviews of profit-shifting arrangements and to commence 20 audits in this area
- examining 30 cases involving foreign tour operators and where necessary adjust their activity statements
- doing about 20 audits and about another 200 risk reviews of SMEs that deal with entities based in tax havens.
Aggressive tax planning
- focusing on boutique arrangements such as offshore structures to avoid tax
- auditing 20 promoters, examine 100 employee benefit arrangements and review a further 25 arrangements and 40 product rulings
- examining the tax planning arrangements of 300 businesses where property developers inappropriately use the joint venture, grouping and going concern provisions of the GST legislation.
Insolvency
- continuing to address phoenix practices, especially in the building and construction industry
- undertaking about 130 audits and will estimate tax debts in circumstances where, for example, directors are unco-operative.
To read the full compliance program - including the specific areas of focus for micro and large businesses -
click here.
For a highly valuable checklist - compiled by leading accountants and business advisers Ashley & Munro and exclusive to QBR readers - see the August edition of our magazine. Call 1800 649 578 or email subs@pubserv.com.au for details to subscribe and secure your copy.