The ATO recently released its compliance hitlist for 2013 highlights
The list looks something like this:
• Incorrect work-related expenses claims
• Data matching
• Wealthy individuals
• Tax havens
• Reporting of PAYG withholding
• Contractor arrangements
• Activity statement refunds
• Large and international businesses (large business generally has an annual turnover of more than $250 million)
• Small business (generally with annual turnovers of less than $2 million)
• Medium-sized businesses (annual turnover between $2-250 million)
• Fraudulent phoenix activity
• Super guarantee
• Self-managed super funds
Whilst many appear pretty straight forward, there are a couple that are either interesting in their own right or should spark some warnings in particular industries.
Data is a big focus for Deloitte but we see that the ATO can drawn on more than 640 million transactions each year to target areas of concern. People often forget that ATO gets data from banks, share registries, employers, merchants, states and territories and other government departments.
As you would expect, the ATO uses this information to not only pre-fill returns but importantly can detect people trying to avoid their tax and superannuation obligations. Last financial year, the ATO identified $947 million in revenue adjustments from some 445,000 reviews and audits. It would appear that honest mistakes can only account for so much.
Phoenix activity is always a bugbear of the ATO and its also a pet hate of mine. Interestingly the ATO sees the highest occurance of this activity around labour intensive industries and by property developers. The ATO makes specific mention that it found over 2,000 property developers who have placed companies into liquidation with outstanding GST obligations on multiple occasions. Phoenix activity also gets a mention in the ATO’s focus of Medium-sized businesses
I have often seen developers claim the refunds associated with the costs to develop the property but then fail to pay the GST once the units or homes are complete. Often this is done as the developer has failed to control costs appropriately and then seeks to recover their overruns by witholding the tax due.
SMEs are often a target for the ATO. Unfortunately, many that I see have failed to maintain adequate records, have poor MIS or absent advisors (eg they only see their accountant once a year for compliance work rather than as a trusted advisor to their business). Early advice is always my catchcry