On 15 July 2013, the Second Commissioner of Compliance, Bruce Quigley released the ATO's Compliance in Focus 2013-14 report ("the Report"). The report highlights the key focus areas for the Australian Tax Office ("ATO") in managing the risks and maintaining the integrity of Australia's taxation and superannuation system for the 2014 financial year.
The report can be located here
The four main areas of focus for the ATO for 2013-2014 will be:
- Tax crime;
- Misuse of Trusts;
- Profit Shifting; and
- Data Matching (Data and information-matching capabilities have increased by 40 million to 640 million transactions for the 2013-14 year).
Last year's compliance program was a significant revenue generator for the ATO and as at May 2013 had raised over $11 billion in liabilities from a total of 734,685 activities.
With the success and increase of data matching the ATO will now check appropriate reporting of private health insurance rebate claims, flood levy exemptions, taxable government grants and payments to contractors in the building and construction industry.
The ATO will be paying particular attention to individuals in the building and construction industry, along with sales and marketing managers with respect to claims for work-related travel expenses.
The ATO will undertake data matching activities in respect of individuals that include:
- 350,000 data matches;
- 4,500 high risk refunds;
- 30 Government grants and payments;
- 5,246 employer obligation checks;
- 1,600 risk-based activities; and
- Review 2,906 individuals with foreign income.
The focus on wealthy individuals will continue during the coming year.
Employers will be subject to extra attention on reporting PAYG
withholding and identifying and correctly reporting fringe benefits
provided to employees. Ongoing compliance focuses for employers
will be workers incorrectly treated as contractors rather than
employees and payment of superannuation guarantee.
The ATO will be increasing their efforts to identify employers that have FBT obligations but are not lodging FBT returns or are reporting obligations incorrectly.
Planned activities for Fringe Benefit Tax in 2013-2014:
- 19,000 follow up late lodgers
- 5,000 employer obligations reviews
Companies that engage in practices designed to shift profits offshore and avoid tax obligations will be carefully looked at by the ATO. These practices may include thin capatalisation and transfer pricing. The ATO is so concerned about this area that additional funding by the government has been given to reduce the risk. For an interesting article on the transfer pricing maze please click here.
Planned activities for tax haven-related issues in 2013-2014 include:
- 680 reviews
- 115 audits
- 50,000 letters
As of 1 July 2012, businesses within the building and construction industry must report all payments that are made to each contractor for building and construction services each year. This is to assist with compliance with tax obligations and promote voluntary compliance.
Planned activities for contractor arrangements in 2013-2014 include:
- 7,500 data matching cases
- 950 employer obligation checks
There are now 700,000 trusts registered in the Australian Tax System with the majority being discretionary trusts. A new Trusts Taskforce has been established to target high risk taxpayers who use trusts to conceal information, mischaracterise transactions and artificially deal with trust income to avoid or reduce tax. The 2013-2014 Federal Budget provided $67.9 million over four years for the ATO to audit taxpayers using trusts. The ATO is estimating a $379 million increase in revenue over the forward estimates.
Planned activities for Trusts in 2013-2014:
- 5,000 data matching cases
- 700 income tax reviews and audits (over 4 years)
For further information about the Trust Taskforce, please visit the ATO's website here.
The ATO has stated that with each accusation of an employer not paying superannuation guarantee entitlement that an investigation will be made. The ATO is expecting to contact 12,000 employers as a result of complaints received in 2013-2014.
Particular focus will be placed on cafes and restaurants, carpentry services and real estate businesses.
Self-Managed Superannuation Funds:
The ATO will monitor registrations of self-managed superannuation funds (SMSF) and when a fund is in its first year and the ATO believe that it is likely to incorrectly operate, the lodgment concession will be removed. This will require the fund to lodge by 31 October and a notice of compliance will not be given until the lodgment has occurred and the ATO is satisfied that correct practices are being abided by.
Key focus areas for SMSF will be:
- Establishment as a genuine superannuation fund
- Lodgment obligations
- Use of prohibited loans
- Related party transactions
- Funds with history of non-compliance
- Incorrect reporting of exempt current pension income, tax losses and non-arm's length transactions
Planned activities for SMSF in 2013-2014:
- 1,100 checks of income tax obligations
- 15,100 checks of regulatory obligations
- 160 auditor compliance checks
Ongoing Compliance for 2013-2014
Each year the ATO will issue roughly 2.2 million refunds with approximately 2% of refunds being reviewed where there is unusual or suspicious activity. Further contact from the ATO may be made to enquire about the circumstances and nature of the refund.
The ATO will continue to monitor and investigate taxpayers who incorrectly report GST when they acquire, use, develop, sell or transfer real property.
Planned activities for GST and other indirect taxes in 2013-2014 include:
- 43,000 refund integrity checks
- 4,600 audits or reviews
Compliance Focus 2013-2014
The ATO is determined to achieve the 85% 'on time' benchmark for lodgment performance. This may drive tax professionals to be more proactive in the acquisition of information to finalise returns by certain time frames.
Key 2012-2013 Results:
|Small-to-medium enterprises||$587million in GST Liabilities raised|
|High Wealth Individuals (controlling net wealth greater than $30million)||Completed 291 tax reviews and audits - raised $1.1 billion in Liabilities|
|Wealthy Australians (controlling net wealth between $5million and $30million)||Completed 291 income tax reviews and audits - raising $281million in Liabilities|
|Data Matching||Over 445,000 reviews and audits - $947million raised in adjustments|
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