The ATO is increasing their focus on collecting more tax, as the Government is spending more money.
The various COVID19 programs have given the ATO an opportunity to use the additional information provided to determine tax compliance, for example:
- Businesses who have applied for JobKeeper, are now on the ATO Radar.
- Similarly, Individuals who claimed Early Release of Super, are also on the ATO Radar.
- The ATO announced, that would also focus on Individuals claiming work related expenses on their tax returns, such as working from home due to COVID19.
This gives the ATO the ability to analyse the data and use techniques to target audits. The ATO is able to request information about transactions in your tax returns, but also can request why information isn’t in your return. This increase in audit activity usually means that you may have to defend yourself, even though you are not liable for tax. The time that is taken to respond to ATO queries (and other regulators) can quickly escalate, and some clients have preferred to engage AAG to assist in their responses and protection of their positions.
ATO compliance approach to COVID-19 stimulus measures
The ATO is increasing its response to fraud and schemes designed to take advantage of the Government’s COVID19 stimulus packages. This includes JobKeeper payments, early release of superannuation and boosting cash flow for employers. Severe penalties will be applied to tax avoidance schemes or those found to be breaking the law.
For more information read our Factsheet on the Data Matching process and what it means for you.
We have summarised some areas for focus for our Business and Individual Clients to be aware of – which are in the attached tables:
|ATO Focus Area – Businesses:|
|JobKeeper||The ATO’s compliance efforts for JobKeeper Payments are focused on ensuring that entities meet the criteria for business income, are claiming for eligible employees and not manipulating their turnover to satisfy the decline in turnover test, as warned in Practical Compliance Guideline PCG 2020/4. *|
|CashFlow Boost||Employers who have entered a scheme in order to gain access to the Cash Flow Boost, or maximise their payments, are also on the ATO’s radar. These are schemes designed to artificially restructure a business, change the character of payments to salary or wages, inflate reported withholding amounts, resurrect dormant entities or phoenixing, or make false statements or fraudulent attempts to create an entitlement. *|
|Superannuation Guarantee||Using the Single Touch Payroll data and that from the Superannuation Clearing House when Super is paid, the ATO are matching when the dates of payments are made so that they can monitor compliance with Super Guarantee obligations.|
|ATO Focus Area – Individuals:|
|Early release of super||
Individuals also risk additional taxes and penalties if they access the COVID19 early release of Super Concession and do not meet eligibility criteria, or are artificially arranging their affairs in order to meet the criteria. The ATO has advised that it has seen some examples of people doing the wrong thing.
The ATO has stopped applications and prevented Super money from being released or have reviewed the circumstances after an application has been processed. Where appropriate, the ATO may apply the Part IVA general anti-avoidance rule for income tax if a taxpayer (or a representative) enters into a scheme mainly for the purpose of obtaining a tax benefit. Other behaviours that attract the ATO’s attention include applying when there is no change to a taxpayer’s regular salary and wage, or employment information, making false statements, fraudulent attempts to meet the eligibility criteria, and withdrawing and recontributing super for a tax advantage. This can also impact their eligibility for a Super Co-contribution. *
Rental income is an area that the ATO has long identified as problematic. The ATO has indicated that some taxpayers continue to claim travel expenses to visit their rental properties, while some claim expenses under repairs when they should be depreciated.
There have been other cases where mortgage interest has been claimed when the property was not rented or available for rent, but is a holiday house reserved for the owners.
Some property investors who do not use tax advisers seem to be unaware of the ATO’s data-matching capabilities, and so make claims that might not be fully compliant. AAG is here to help with professional advice, that is not just useful, but may be essential to you.
|Capital Gains – Shares & Property||
The ATO is checking the sale of property and sale of shares with different sources, to make sure that people are putting any capital gains tax into their tax returns.
From share registers and share trading accounts, the ATO is provided information to enable them to track back to your tax return if you have declared a capital gain or loss.
With the information sharing protocols with the various State Governments, the ATO is provided with information relating to sale of properties from around the country, and use this data to match if you have declared any sale of property in your tax return.
|Funds received from Overseas||If you receive monies from overseas, the ATO receives this information from the various banks. They then may write to you to ask what this was, and why it isn’t income that should be in your tax return.|
For more information on the ATO compliance measures and data matching programs, please see these links:
What is AustAsia Group doing to assist?
As many clients are aware, AAG has engaged Audit Shield to provide insurance cover for the cost of professional fees, such as ours, in the event you are contacted by the ATO or other revenue related government body for a review or audit.
Audit insurance will cover reviews for both current and prior year lodgements including, but not limited to income tax returns, activity statement audits, fringe benefits tax and payroll tax. Please see our factsheet on the Audit Shield Service .Email our consulting team, for advice on this service, if it is appropriate for you.
Should you have any questions on your obligations please contact us or email our Consulting Team at firstname.lastname@example.org.
* © CPA Australia Limited