ATO compliance program for 2012-2013: major risk areas revealed
tax_return_image.jpgSpelling out taxation compliance

The Australian Tax office has recently released its 2012-2013 Compliance Program  that at its most primitive can be labelled as a do's and don'ts guide to meeting tax obligations.

Publicly exploring the ATO's planned compliance activities, the 2012-2013 Compliance Program identifies the major risks in the respective areas of individual taxation, micro enterprises, small to medium sized enterprises, large enterprises and superannuation.  

It simply alerts the public as to what areas will be in particular focus, as well as identifying the actions the ATO will use to detect and deal with non-compliance. 

With over 22 million people in Australia required to lodge individual income tax returns on top of a huge number of private and public enterprises required to report financial and superannuation activities, the maintenance of an effective and developed taxation system in Australia couldn't be more important.

As it's not even close to possible for all tax information to be audited, the ATO relies heavily on the push for voluntary compliance measures with an intention of giving taxpayers all the information, and tools they need to help them to willingly meet their obligations.

This not only helps to facilitate an accountable, just and honest tax system in Australia - it is purely more efficient.

Read about the risk areas and other compliance issues for individuals, micro enterprises, small to medium sized enterprises and superannuation below.

Risk areas

Individuals:

  • Incorrect or fraudulent refunds from over claiming and deliberate fraud; Data mining and other analytical tools are used to identify potentially fraudulent tax returns. Incorrect claims may involve basic errors and oversights or misunderstanding of entitlements, a lack of documentation to support claims as required by law, lodgement of deliberately false claims and identity crime.

 

  • Review of work-related expenses for occupations with high levels of claims; ATO will focus on claims made by individuals in the following occupations: Defence Force - non-commissioned officers, information technology managers and plumbers.

 

  • People getting caught up in tax avoidance schemes

  • Omitted income, including dividends and interest, capital gains and foreign source income; The use of third party information helps the ATO to detect income from a range of sources. A comprehensive information matching process helps to detect income that has not been declared.

 

Micro enterprises:  businesses with an annual turnover of under $2 million or superannuation funds with less than $2 million in assets.

  • Under recorded and unreported cash transactions; Unreported cash economy activity is detected by risk profiling and third party data matching. Risk profiling is identifying the potential tax risks such as businesses operating outside industry or economic norms as measured by business benchmark ratios. Some industries use cash more than others and more intensive strategies are applied for risk profiling. There will be reviews of businesses in the plastering and café industries.

 

  • Employer obligations; Contractor agreements; some employers try to avoid their tax and superannuation responsibilities by incorrectly engaging workers as contractors rather than employees.

 

  • GST refund integrity and GST evasion; The ATO applies sophisticated risk detection models to examine all activity statements where there is a claim for a refund. The taxpayer's compliance history, industry norms and trends are some of the things that the ATO take into account.

 

  • Ensuring businesses in meeting their lodgement obligations

 

  • Incorrect fuel tax credit claims following implementation of the clean energy measures

 

  • Other compliance issues for micro enterprises include GST and property transactions, Luxury car tax, Wine equalisation tax (WET) and excise.

 

Small to medium enterprises: businesses with an annual turnover between $2 million and $250 million.

  • The ATO has started to develop small business benchmarks in 2009 as part of their strategy to deal with businesses that do not declare all of their income. 

  • Participation of wealthy individuals in the tax and superannuation systems

  • Use of trusts to inappropriately minimise tax

  • Division 7A - treatment of private company profits

  • Capital gains - non disclosure and incorrect reporting; The ATO conduct reviews where they suspect that taxpayers may have incorrectly reported capital gains or losses. The expect to take on cases that focus on incorrectly classifying ordinary income as a capital gain, creating a company structure to enable a back to back rollover to achieve deferral of tax, claiming small business concessions when not eligible.

 

  • Employer compliance with fringe benefits tax rules

  • Integrity of business systems for GST and excise obligations

  • GST and property transactions

Other compliance issues for SME's include overseas interests and international dealings, employer obligations, lodgement compliance, managing tax and superannuation debt, GST refund integrity and GST evasion, GST and financial supplies, GST and retirement villages, GST and international transactions, Luxury  car tax, Wine equalisation tax, Fuel tax credits and the clean energy measures.

 

Superannuation

  • SMSF's and compliance with obligations including income tax, illegal early access to superannuation, the competency of approved auditors; The ATO has confirmed that this year the focus on compliance activity will be on new trustees, lodgement of fund annual returns to improve timeliness, irregularities in exempt current pension income, re-reporting of contributions and compliance with excess contributions tax release authorities, breaches of trustee obligations.

 

  • Employer compliance with their superannuation guarantee obligations; Cafes and restaurants, real estate businesses and carpentry businesses in home building or construction will be focus areas in superannuation guarantee audits.

 

  • The quality of information reported to us by superannuation funds

  • Excess contributions paid into superannuation funds

  • Large fund compliance with their income tax obligations

 

Summing it up

All tax payers should cast their eyes over this guide to ensure that they are well informed and aware of their obligations, entitlements and also have some knowledge about the ATO's operating environment.

With a mission to ‘champion the interests of honest tax payers' the ATO is all about improving its tools, help and services to protect the interests of honest taxpayers and the integrity of the tax system.

Stick to their rules to avoid the unnecessary trouble that comes with non-compliance.

The 2012-2013 Australian Tax Office compliance program is a vital resource and reference guide. For a full investigation into the compliance activities you can read and download the guide  from the ATO website at www.ato.gov.au/compliance.

 

 
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