Targeting GST compliance
Targeting GST compliance
We have received additional funds to implement the GST voluntary compliance program.
The program focuses on:
- protecting businesses, taxpayers and the community who are doing the right thing, by detecting and dealing with taxpayers that deliberately avoid their GST obligations
- enhancing support and education to encourage taxpayers to willingly meet their GST obligations.
We want to make sure that taxpayers willing to do the right thing are not disadvantaged by unfair practices, with everyone paying their fair share of tax.
We are also continuing to expand our ability to identify non-lodgers and detect taxpayers that over-claim entitlements, deliberately under-report or omit income, and use cash transactions to hide income and evade tax obligations.
Our key focus areas
Details the program's key focus areas: improving activity statement lodgment, dealing with GST fraud and evasion and reducing GST debt.
Helping taxpayers to comply
Details the support and assistance services we offer to taxpayers to help them meet their tax obligations.
Protecting taxpayers and the community
Details what we are doing to detect non-compliant GST activities and explains how we support taxpayers who do the right thing, helping to ensure a level playing field.
Details additional activities that expand our ability to detect and take action against those taxpayers deliberately not comply with their GST obligations.
Results of the GST voluntary compliance program
The key results of the GST voluntary compliance program in 2011-12.
Frequently asked questions
Frequently asked questions about the GST voluntary compliance program.
Our key focus areas
Our lodgment enforcement work is focused on identifying and supporting taxpayers who fail to lodge activity statements and who choose not to work with us to resolve their outstanding lodgments.
- continue to compare lodgment and income history with data matched from external sources. This allows more accurate identification of these taxpayers, whom we contact and encourage to assess their liabilities and take appropriate action to comply
- work closely with the property industry. We match asset transactions held by state revenue offices and land titles offices to identify and engage developers that sell property but fail to lodge their activity statements
- encourage taxpayers to review their activity statement obligations and check that they are lodging correctly, and on time
- contact taxpayers if their lodgment is not up to date, with a focus on taxpayers whose details are not up to date
- take firmer action to resolve outstanding lodgments where taxpayers fail to work with us to resolve their outstanding lodgment obligations. This may include raising default assessments, imposing penalties or taking prosecution action.
It's important to contact us as early as possible if you think you might lodge or pay late. To check if alternative arrangements can be made, phone us on 13 28 66. Even if you can't pay on time, you still need to lodge your activity statement by the due date.
In the first two years of the program, we:
- reminded almost 2.7 million clients about their BAS lodgment obligations via mail-outs and SMS
- undertook stronger enforcement activities with over almost 37,000 taxpayers
- contacted another 200,000 taxpayers with outstanding lodgments
- raised $464.1 million in GST liabilities and a further $692.9 million in other non-GST liabilities.
Requirements when ceasing business
If you've ceased business, you should:
- cancel your Australian business number (ABN) and goods and services tax (GST) registration, and notify us if your tax file number (TFN) is no longer required. When cancelling your ABN, it will also cancel ATO digital certificates and the registration of any representative holding an AUSkey for your business. This may prevent you from using some government online services
- notify us if you longer require your TFN
- inform us of any changes to your circumstances and keep your details up-to-date, to ensure any correspondence sent to you reflects your current situation and prevent unnecessary contact from us
- ensure all your lodgment, reporting and payment obligations are up to date, including your activity statements and PAYG withholding reports, refunds of GST credits and outstanding tax debts.
Registered tax and BAS agents
We will contact you, or your client, to request the immediate lodgment of activity statements that are not lodged on time or remain overdue.
To prevent being contacted about late or non lodgment:
- encourage your clients to meet their tax obligations by providing necessary records before the due date
- set up a plan with your clients, for the accurate and progressive lodgment of activity statements throughout the financial year
- check the Lodgment Program 2012-13 website for updates and confirm your extended due dates available for electronic activity statement lodgment.
- lodge your clients' activity statements electronically to ensure they receive the full benefit of Lodgment Program concessional due dates
- keep your clients' contact details current, to allow for the correct issue or re-issue of activity statements
- delete any clients that you no longer represent from your registered agent number, so that ATO records accurately reflect your client list
- request a deferral of lodgment, if your client is experiencing unforseen or short term difficulties
- it is important you contact us early to discuss the support available to help manage your lodgment program during this time.
If you are a registered tax agent, we advise you to review information available on the pending changes to the Lodgment Program 2013-14. This way you will be kept up to date on the new requirements, which affect your lodgment of income tax returns and fringe benefit tax returns. From 1 July 2013:
- concessional due dates available under the Lodgment Program will only apply to returns that you lodge electronically.
- you will need to lodge 85% or more of your clients' current year returns by the lodgment program due date, or deferred due date.
Take advantage of the support products available during the 2012-13 financial year. These will include the bulk client list deletion offer and updates we provide to your practice summarising your lodgment program performance to date. These updates will help you to make advance preparations leading up to Lodgment Program 2013-14. It will also give an indication of how your lodgment performance compares with similar practices.
For further information on how to meet new 2013-14 lodgment program requirements:
All persons mentioned in the scenarios are fictional
Example 1: Conviction and heavy fine for failing to lodge
For as long as Ben could remember, his family had owned Wish Jewellers. Throughout his twenties he worked in the family business, specialising in designing custom pieces and accompanying his father on trips around the world sourcing precious stones and diamonds. When his father announced he would be retiring from the business, he could think of no one better than Ben to take control.
Ben, like other business owners, worked long hours filling orders for customers and supporting his young family. At the end of the week when he closed his doors, the last thing he felt like doing was the paperwork. What started as a month's backlog of filing quickly turned to a year's worth, and then two.
When Ben failed to lodge his activity statements he caught the attention of the ATO. Trudy, an ATO staff member, contacted Ben, offered him assistance and provided him with an extension to lodge his outstanding returns. Ben chose not to cooperate.
The ATO pursued legal action and it was only after Ben was issued with a court summons that he lodged the outstanding returns. During sentencing, the magistrate acknowledged that he had been non-compliant for some time and stated that, as taxpayers, we owe it to the community to lodge all our returns in a timely manner.
Ben was convicted and fined a total of $10,500 in relation to nine offences for failing to lodge GST returns.
Example 2: Poor record keeping does not reduce your obligations
When Barry started Hardwearing Home Renovations, his aim was to build his customer's dream homes - not be stuck with paperwork. So one of his first priorities was finding an accountant. Barry got on with building, and once a quarter would collect all his receipts and drop them off to his accountant.
During the global financial crisis (GFC), Hardwearing Home Renovations' business slowed as clients found it hard to pay up and potential clients turned their minds to saving. While Barry still had a few jobs up his sleeve, he did begin to worry about his financial affairs and how he would cope if it turned out he owed the ATO on his next BAS.
The next day, on the way to a job, Barry heard on the radio that the ATO would start making economic stimulus payments within a week. 'Excellent', Barry thought, 'that gets me off the hook with my next BAS. They will be too busy worrying about making those payments to chase me.'
Weeks turned into months and Barry continued to fail to lodge his BAS. Unfortunately for Barry, the ATO had kept a close eye on BAS lodgment and soon he was contacted by the ATO. Barry just hoped the problem would go away and didn't face up to it. Several months into the audit, Barry was informed that court action may soon commence and he finally decided to provide the paperwork to his accountant.
Upon receiving the court attendance notice, Barry's accountant lodged his outstanding BAS for Hardwearing Home Renovations. After pleading guilty in the Magistrates Court of Western Australia, Barry was convicted and received a fine of $49 000. In sentencing the Magistrate noted that 'although you entered an early plea of guilty and have since lodged all outstanding BAS, poor record keeping does not reduce your, or anyone else's obligations.'
We have received extra resources to detect and deal with GST refund fraud. We are expanding our efforts to verify refunds by phoning or visiting businesses and contacting third parties to substantiate claims, including checking for omitted or incorrectly reported property sales and purchases.
Identity crime is a community-wide issue and often facilitates GST fraud. We are increasing efforts to detect those using false, manipulated or stolen (or assumed false or stolen) identities to obtain GST refunds. We will be:
- checking and verifying GST registrations, including where people try to avoid registering, or register using a false or stolen identity
- contacting taxpayers registering for GST to confirm their identity
- continuing to validate suspect returns and conducting audits of high-risk refunds.
Those choosing to disregard the law, make fraudulent claims and deliberately avoid their GST obligations will face serious consequences, including interest, penalties, and where appropriate, prosecution or referral to the Commonwealth Director of Public Prosecutions (CDPP). This includes taxpayers who:
- deliberately do not register for GST when they are required to
- intentionally do not report, or consistently under-report, their tax obligations
- collude with others to evade or avoid tax obligations
- intentionally do not pay their tax obligations
- try to obtain a refund which they are not entitled to persistently and repeatedly exploit bankruptcy.
We take a balanced and differentiated approach to collecting GST debt and will assist businesses who are willing to work with us. If you cannot pay your tax debt on time, contact us immediately on 13 11 42, to discuss your circumstances.
If you cannot pay your tax debt on time, contact us immediately on 13 11 42, to discuss your circumstances.
To ensure that we maintain a level playing field for all taxpayers, we detect those that are seeking an unfair advantage by not paying their GST liabilities. In particular, we are focusing on ageing debts and phoenix activity.
If you are unable to make, or miss, a GST payment and do not contact us to advise of the missed payment, we will phone you or send a reminder notice soon after the due date. In some cases, we may also refer your debt to an external collection agency.
We take firmer action, such as issuing garnishee notices and statutory demands, against those who are unwilling to work with us, who are continually defaulting on arrangements or unable to pay and don't take steps to resolve their situation.
If you have previously defaulted on a payment arrangement, we may impose more stringent requirements before agreeing to a new arrangement. For example, we may ask for an upfront payment and/or request that payments are made by direct debit.
Where there are concerns about the viability of your business, these will be discussed with you directly. Our assessment of business viability looks at the ability of your business to pay its outstanding debts and meet its ongoing commitments.
We have raised over $1.3 billion in GST revenue in the first two years of the program which includes:
- $763 million additional GST liabilities raised from refund fraud and serious evasion risks, and lodgment enforcement activities
- $568.8 million collected from additional debt collection activities.
Funding under this program has enabled us to undertake around one million more contacts (letters, telephone calls, visits).
The program has also raised more than $758.9 million in non-GST liabilities and collected $923.1 million in non-GST debt in the first two years.
Managing your business' GST payment obligations
Businesses are more likely to fall into debt if they:
- do not keep their GST and income tax payments separate from their other finances
- have difficulties in managing their cash flow and cannot predict monthly income and expenses
- do not update their business records frequently.
Most people know when they are about to miss a tax payment. If you miss a payment, you should contact us as soon as possible. It is important that you lodge your activity statements and tax returns on time, even if you are unable to pay by the due date.
We offer a range of services and tools to help your business avoid falling into debt. We have a dedicated hardship team to assist businesses experiencing serious financial difficulty or hardship.
Registered tax and BAS agents
If you have a client who owes tax or is finding it hard to pay on time, it is important to contact us early. Where possible, we will work with them to resolve the problem.
It is also important that your client lodges on time, even if they are unable to pay by the due date. The general interest charge (GIC) for late payments continues to accrue until all tax and GIC is paid in full.
All persons mentioned in the scenarios are fictional
Example 1: Financial difficulty leads to outstanding debt
Phil, a self-employed carpenter, went through a quiet period during which he found it difficult to get work. He continued to submit his activity statements but decided to stop paying his goods and services tax (GST) obligations.
After receiving a notice about his outstanding tax debt, Phil phoned us and negotiated an arrangement to pay the debt by instalments. The taxation officer explained the conditions of the arrangement, including the need to continue meeting his ongoing GST lodgment and payment obligations.
Two months later, Phil received a phone call from us advising that his payment arrangement had defaulted. Although he had been paying the agreed instalments, Phil had failed to pay one of his ongoing activity statement liabilities by the due date. He explained this was due to continued cash-flow problems.
After obtaining financial information from Phil that demonstrated the viability of his business, we agreed to a new payment arrangement with instalments to be paid by direct debit.
If you are having difficulty paying or cannot pay your tax debt on time, contact us as early as possible on 13 11 42 to discuss your circumstances. It's important you continue to lodge your activity statements even if you can't pay on time.
As part of our increased focus on property development, we are protecting the community by keeping a watchful eye on company directors with a history of avoiding their GST obligations. Rather than look at the business, we're looking at the people who control the business that are deliberately non-compliant.
Our aim is to engage directly with these developers at the point of GST registration and throughout the property life cycle. We will encourage them to correctly assess, report and pay their liabilities. Where necessary, we will ask them to provide a security bond deposit against projected future tax liabilities or we may issue a garnishee.
We are committed to creating a fair and level playing field for company directors who are trying to do the right thing. We understand that GST and its relation to property transactions can be complex.
It is essential to ensure you are reporting your property transactions correctly, including the transfer, sale and/or purchase of real property. Even with a 'one off' transaction you may still be required to register for GST because in completing your 'one off' property transaction you may be conducting an enterprise.
If you believe you may have made a mistake in recording your property transactions, you can make a voluntary disclosure. A voluntary disclosure provides you with the opportunity to bring your tax affairs into order.
Registered tax and BAS agents
If you have a client in the property development industry, we may contact them at registration stage and throughout the property lifecycle.
We will encourage your clients to correctly assess, report and pay their liabilities. Where necessary, we will ask them to provide a security bond deposit against projected future tax liabilities or we may issue a garnishee.
Ensure your client reports these transactions on their activity statements and/or income tax returns to ensure they meet their tax obligations.
If you think one of your clients has made an error relating to a property transaction, they can correct it by making a voluntary disclosure.
All persons mentioned in the scenarios are fictional
Example one: Taking action to guarantee future GST
Ron and his friend Geoff had always worked well as business partners. With over 30 years experience between them in the building industry they knew a thing or two about property development.
Over the years, Ron and Geoff had been through their ups and downs but had always pulled through together. While they had seven insolvent entities linked to them, they thought they could expand their services and have one more go at it.
They registered a new entity called Ron's Rural Properties. Planning and building began and Geoff lodged their first activity statement (BAS) claiming more than $550 000 in GST credits. However, because of their history of sitting as directors of insolvent companies, Ron and Geoff were flagged by the ATO.
An ATO case officer contacted Ron and Geoff and issued them with a security bond demand. This required Ron and Geoff to provide a guarantee that the GST would be paid before the sales of the property development went through.
With Ron and Geoff's cooperation, more than $450,000 in future GST claims has been secured.
Example 2: Know your responsibilities as a director of a company
Gary had always been good at making a quick buck. Whether it was a hot tip on the horses or a quick sale of some shares, he loved the thrill of watching his bank balance for retirement grow.
When Gary turned 50, he decided that it was time to embark on a career change to pump up his nest egg. He had been researching the Queensland property market extensively over the last 18 months and tipped it to boom within five years.
Using the payout from his previous employer, he formed Gary McDougall Properties, purchased a large block adjacent to the Tweed River and called in favours from some mates in the construction industry to build five free-standing townhouses on the cheap.
18 months later, Gary had sold all five properties and was living the laid-back Queensland lifestyle.
Realising he had found his calling, Gary replaced Gary McDougall Properties with the more aptly-named Sun, Surf, Sand Properties and found his next potential property: a run-down cottage that was zoned for re-development on the north coast.
Over the next two years, Sun, Surf, Sand Properties kicked into overdrive, building a complex of 16 apartments, with many allocated to buyers off-the-plan.
Unknown to Gary, the ATO had flagged him as a taxpayer who may pose a risk of liquidating his company after reporting the property sales.
Through a further audit, the ATO uncovered that Gary had failed to pay $1.21 million on the five townhouses developed by Gary McDougall Properties. The ATO set up a meeting with Gary and Jen, the in-house accountant for Sun, Surf and Sand Properties.
The ATO case officer advised Jen and Gary that they could help themselves by voluntarily paying what Sun, Surf and San Properties owed to the ATO. They were warned that, 'if you continue to neglect your responsibilities, we will issue a garnishee notice'.
Over the next 6 months, Gary and Jen met several times with the ATO and negotiated a monthly payment plan. During this time, Jen continued to lodge activity statements for Sun, Surf and Sand Properties but did not pay any GST, which increased the debt.
At another meeting with the ATO, Gary and Jen agreed to sell off some unencumbered apartments and paid the $1.34 million debt in full. Because they choose to cooperate with the ATO, legal action was avoided.
Helping taxpayers to comply
We will provide support for taxpayers to ensure that they meet their tax obligations.
Assistance for small business
To help small businesses manage their tax affairs and ensure willing participation in the tax and superannuation systems, we have a range of support products and services available. Our Small Business Assistance Program provides a variety of practical and tailored support for small business, including short videos, seminars and webinars, and tailored assistance visits that deal with specific tax issues affecting the business. The Small Business Assistance Program aims to help small business owners better understand their rights and responsibilities, and be able to meet their obligations easily and at minimal cost.
GST video tips
We have produced four assistance videos to support small businesses to meet their GST obligations. Three of the videos provide simple, practical tips to help businesses 'get it right' and manage their GST obligations.
Tip 1: How to keep your records for GST Tip 2: How to complete your business activity statement Tip 3: Lodging your business activity statements on time
The fourth video, Stay in control of your business, provides information on the support the ATO provides to small businesses that are having difficulty paying their tax debt:
Integrity of business systems
Businesses with ineffective systems have a higher risk of incorrectly reporting their GST liabilities. To assist businesses we have developed a fact sheet, GST and integrity of business system risks, which outlines common errors made by businesses and explains how ineffective business systems and processes can cause GST reporting errors.
Tax and BAS agent services
As a registered agent, you can contact us for assistance with a range of issues, including help with:
- online services
- meeting your lodgment program
- complex administrative issues
- arranging a relationship manager visit.
You can also use our issues management and case management facilities if you:
- can't resolve issues through our normal channels or self-help options
- want more support or to lodge a complaint.
Telling us about a mistake or error
If taxpayers undertake a review of their records and find one or more mistakes that increase their tax or reduce any credits they may have claimed, they should make a voluntary disclosure.
A voluntary disclosure provides taxpayers with the opportunity to bring their tax affairs into order. In most cases it also opens the way to concessional treatment, both for the penalties that apply as a result of the unpaid tax or false or misleading statement, and any interest charges. Taxpayers will still have to pay the tax they owe. We will generally reduce penalty amounts. The amount of the reduction depends on when we are told.
We want to ensure that everyone pays their fair share of tax, so that taxpayers doing the right thing are not disadvantaged by unfair practices.
We are doing this by:
- using new risk indicators to detect incorrect or fraudulent refund claims on activity statement credits
- issuing pre-due date lodgment reminders to taxpayers via SMS and letter
- contacting taxpayers with overdue activity statements
- verifying refunds by phoning or visiting taxpayers and contacting third parties to substantiate claims
- matching sales and high-value transactions to activity statements, and using information on asset transactions (for example, in the property industry) from state revenue offices and land titles offices
- comparing businesses to small business benchmarks for their industry to identify cases for audit or review; businesses performing outside their benchmark range may not be recording or paying tax on all their transactions, especially cash transactions
- using the small business benchmarks to calculate default assessments where a business has reported insufficient or unreliable information, or has failed to meet their lodgment requirements
- increasing our focus on taxpayers that have multiple outstanding activity statement obligations, including telephony-based lodgment enforcement, raising default assessments and, in some cases, prosecution action
- taking firmer action against taxpayers that do not work with us to address their debts.
Taxpayers seeking to disadvantage others and the community by deliberately choosing not to comply with their GST obligations may face serious consequences, including interest, penalties and potential prosecution.
We will audit and - where appropriate - prosecute taxpayers who:
- deliberately do not register for GST when they need to
- intentionally do not report, or consistently under report, their tax obligations
- conspire with others to evade or avoid tax obligations
- intentionally do not pay their tax obligations.
Increased technology and capability is allowing us to better identify those people committing fraud and deliberately avoiding their GST obligations.
Data matching allows information from a variety of sources to be brought together to ensure that everyone pays their fair share of tax. We collect significant amounts of data from a range of external sources including banks, other government agencies and industry suppliers. We then compare this data with the income and expenditure that taxpayers have reported to us.
Small business benchmarks
Our benchmarks are financial ratios developed to help businesses compare their performance against similar businesses in their industry. Benchmarks provide guidance on what we normally expect to see in business reporting.
We have more than 100 business benchmarks covering more than one million businesses.
Benchmarks are one tool we use to help us detect businesses that may be avoiding their tax obligations by not reporting some or all of their income.
By developing benchmarks for small businesses we are making it fairer for everyone, by making it harder for dishonest taxpayers to get away with not reporting cash transactions.
We take all forms of tax evasion seriously and take firm action against taxpayers, intermediaries and others who engage in tax crime by:
- gathering and analysing intelligence on risks and threats to the tax system
- investigating suspected cases with a view to prosecution, often jointly with law enforcement agencies such as the Australian Federal Police
- sharing information across partner agencies to achieve whole-of-government outcomes in tackling tax crime
- publicising the outcomes of this work to raise community awareness.
Example: Builder fails to report contractor payments leading to fines and a criminal conviction
All persons mentioned in this scenario are fictional
A Sydney builder was audited after we received a report from a contractor, which indicated that payments were made to the builder for providing services on a project totalling nearly $180,000.
Upon investigation the builder's activity statements (BAS) didn't show this income and, when questioned, the builder denied receiving any payments.
Evidence found in bank statements and records from the owners of the building project showed that the builder failed to report $177,500 in income, which led to a tax shortfall of just under $24,000.
He was prosecuted on six offences, including recklessly making a statement to a taxation officer that was false and misleading. The builder, who was fined $18,000 and ordered to pay additional penalties of $17,300, now has a criminal conviction.
For more information about:
You can report suspected tax evasion by:
- completing an online tax evasion report
- phoning us on 1800 060 062 between 8.00am and 6.00pm, Monday to Friday.
Results of the GST Compliance Program
In the first two years of the program, we received extra funding to address GST compliance, which has helped us to collect an extra $1.3 billion in GST revenue.
In the first two years of the program:
- We raised $763 million in additional GST liabilities from refund fraud and serious evasion risks, and lodgment enforcement activities.
- We collected $568.8 million in GST through additional debt collection activities.
- We raised more than $758.9 million in non-GST liabilities and collected $923.1 million in non-GST debt.
- We have also undertaken around two million additional contacts with taxpayers to date regarding their lodgment obligations.
Last Modified: Monday, 11 February 2013