People Onto the ATO Radar
1. Rich People
From the Compliance Program we see 3 areas of attack:
Selling Property: Your clients selling real estate and forgetting
to report the capital gains.
Big income making employees: Angry public company executives
that earn a tonne of money and pay more than ½ of
it in tax and try and hide this income through silly strategies
(whereas the small business owner also earns a lot of money,
but legitimately uses trusts to hose down the highest marginal
Superannuation: Your clients claiming inappropriate cost
of funding contributions (this was big in the lead up to
1 July 2007) and other superannuation affairs. Failure to
have up-to-date documents such as the Investment Strategy
and Product Disclosure Statements.
2. Small Business
If your clients’ business is small (turning over less
than $2 million) then the ATO looks at:
Company Loans: Have your clients failed to document loans
from their company?
Service Trusts: These are common for lawyers, doctors, accountants.
Make sure your clients document what they do with a Service
Trust Agreement .
Failing (or forgetting) to pay PAYG and superannuation: Although
this might be great for your clients’ cash flow, encourage
your clients to stay up to date with these payments.
Failing (or avoiding) to bank cheques towards the end of
the financial year: If your clients are on a “cash” system
they might be delaying the collection of debts, processing
of credit cards and banking cheques until 1 July 2008.
Cash economy: virtually every tradesperson you ever meet
gives you a “discount for cash”. Tell your clients
that this is code for lets steal from the ATO together. The
best way they can deal with this is get their cash discount.
Then ask for a Tax Invoice. If the tradesperson does not
give them one then they should report them to the ATO. Alternatively,
your clients could get find the tradespersons ABN from here
and generate their own Tax Invoice.
GST: Make sure that your clients are seeking the correct
refunds of GST.
3. Medium Enterprises
For enterprises turning over between $2 million and $100
million, the ATO looks at certain issues. For our Platinum
Members that paid $99 to upgrade they can read the 7 issues
and what to do about them here.
For enterprises which turn over more than $100 million,
the ATO looks at:
Good governance: boards need a high level of awareness of
Evolving capital markets, including more closely monitoring
merger and acquisition activities: particularly those involving
private equity syndicates.
Aligning tax and economic performance — including by
investigating the characterisation of income and expenses
and the failure to account for GST on unique transactions.
International tax arrangements: sharing information with
foreign jurisdictions and taking a coordinated compliance
Cross-border crime tax evasion - especially channelling funds
to tax havens and using fraudulent expenses from offshore
jurisdictions to reduce tax in Australia – Wickenby.
Basically if you are rich it is best that you go and live
in another country and avoid the horrors of a mischievous
and confusing tax system.
Identity crime – typically used by individuals who
lodge multiple business activity statements to fraudulently
obtain GST refunds to which they are not entitled.
GST: major infrastructure projects and the use of the GST
Accountants, Advisers and Lawyers
For tax professionals, the Compliance Program looks at:
Helping: Our friend the ATO provides improved services to
this sector (e.g. someone at the ATO will answer the telephone
within 5 minutes, yeah - sure.)
Threat: Carrying the big stick of promoter penalty laws.
These laws are drafted so widely that if you client stuffs
up you will be liable for their actions if you gave advice.
This is how the threat operates, particularly for accountants.
Say your practice has 500 clients. One of them fails an ATO
audit. The ATO then “randomly” audits 10 of your
other clients. If 3 or 4 fail that audit then the ATO audits
all 500 clients until you lose every client and you close
down and go work as one of those ethical tradespersons.
The ATO has basically made every accountant doing tax returns
an ATO enforcement officer.