The taxman’s 2008 focus
Thursday, 17 April 2008
Last Updated: Thursday, 17 April 2008
By Terry Hayes
Compliance, although always an issue, has been honed by the taxman to three points of interest for businesses this year.
This year the tax office is focused on three areas for compliance by small and medium businesses:
- Reducing small business tax debt – small businesses with a turnover of less than $2 million account for about two-thirds of outstanding collectable debt.
- A continued focus on the cash economy with new strategies including more effective follow-up of information from third parties and identifying those "whose lifestyles are out of step with their reported income".
- A key change this year is a significant increase in compliance activities focusing on self-managed super fund regulatory issues such as in-house assets and loans to members.
Small and medium business tax debts
Collecting outstanding tax debts from smaller businesses is a very “big ticket” item on the tax office’s compliance program. The tax office is trying to get small business tax debt down by expanding its automatic dialler technology, referring some debts to external debt collection agencies, and by allocating more staff to recovering superannuation guarantee charge debts owed to employees.
The tax office is also using risk modelling to better tailor its treatment of taxpayers who have a debt by applying different strategies depending on their individual circumstances.
By using this capability, the tax office seeks to identify taxpayers who benefit from early contact, helping them to avoid problems further down the track. The tax office obviously doesn’t want business to “stew” over a tax debt – the earlier businesses make contact with the tax office, the better the chance of being able to work out a solution that is acceptable to both sides.
The Taxation Commissioner says the tax office will take individual circumstances into account and seeks to be “as fair and reasonable as possible”.
Ignoring a tax debt will certainly not make it go away and, in the extreme, can result in dire consequences.
An Adelaide man was recently sentenced to three years and nine months jail by the Adelaide District Court for tax fraud totalling over $400,000.
He will serve two years and 10 months jail before being eligible for parole. In 2004 and 2005, the man failed to pay $91,673 GST for a labour hire business he operated. During the same period, he also failed to pay the tax office $277,241 of tax for his employees and $42,050 in income tax when he didn't lodge an income tax return for 2004-05.
Cash economy
The tax office is continuing its focus on the cash economy. This includes new strategies including more effective follow-up of information from third parties and identifying those "whose lifestyles are out of step with their reported income". For instance, the tax office has been data matching owners of luxury boats, aeroplanes, cars, etc.
These checks regularly reveal that those involved have not lodged tax returns. So they are used by the tax office to get people back into the tax system and to collect any outstanding tax.
As part of the data-matching process, where tax returns have been lodged, the tax office also checks the income figures in the tax returns to see if they support the purchase of such assets. Where there is doubt, a tax audit can result.
The tax office is also paying special attention to business-to-consumer cash transactions; for example, retail businesses where non-reporting of cash transactions is facilitated by high-volume, low-value cash transactions.
Others that are attracting tax office attention are those where there is a high risk of non-disclosure of cash income, such as tradespeople and sub-contractors in the building and construction industry, and operators of restaurants and cafes.
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