Individual taxpayers in 2011-12 accounted for 43% of total ATO collections.7
Figure 7.1 Total tax collections (Individuals)
Registering in the system
There are 19 million active tax file numbers registered to individuals. Population data from the ABS confirms that this is a very high proportion of Australian residents - remembering that a TFN is not by law a mandatory requirement.
Of the 640,000 plus people who obtained a TFN in 2010-11, over 50% were either permanent migrants or non-residents with working visas.
Strengthening proof-of-identity procedures has seen those seeking to obtain an unintended advantage from the tax system switching from false identity creation to the takeover of other taxpayers' legitimate identities. This includes the use of TFNs belonging to other people.
We found that the number of compromised TFNs (those that are stolen, misused or lost) has increased to 30,000 over the last 3 years. Over 40% of TFNs used to conduct refund fraud formerly belonged to temporary visa holders - a section of the community often targeted by criminal groups.
We continue to educate the community about the importance of protecting their TFNs. We also 'lock down' TFNs that are no longer being used to minimise the risk of identity takeover and improve register integrity. The 'lock down' process makes a TFN inactive and stops it from being used inappropriately to deal with the ATO.
Lodging on time
Of 19 million active TFN holders, approximately 12.4 million lodge tax returns every year. Not all individuals who have a TFN are required to lodge.
We have seen an increase in the rate of on-time lodgment of income tax returns. In 2007-08 there was an increase in the rate of overall lodgment, driven by the tax bonus initiative.
We contacted, via letter, phone or SMS, 1.3 million individuals following up their income tax or activity statement lodgment obligations. These activities resulted in net refunds of approximately $26 million.
Figure 7.2 Lodgment on time (Individuals)
At the same time, we have seen a steady upward trend in self-preparers using e-tax to lodge returns and a corresponding fall in the use of paper returns.8
Reporting correctly
Most income earned by individuals is salary and wages. A comparison between Australian National Accounts compensation of employees data and salary and wage amounts from income tax returns suggests that there is a strong correlation between the ABS data and what taxpayers are reporting.
Figure 7.3 Accuracy of income tax reported (Individuals)
To an extent, this is expected since the PAYG withholding system makes it more likely that taxpayers will correctly report salary and wages. Pre-filling adds to this effect by assisting taxpayers to correctly report their income, both for salary and wages and for other types of income (see Pre-filling now used for almost all tax returns lodged electronically, page 21).
In addition, expanding our information matching capability and obtaining more information from third parties has helped us to treat a broader range of risks.
In 2011-12, we wrote to approximately 540,000 taxpayers concerning apparent discrepancies, revealed by information matching in the information in their returns. We have raised $915 million in revenue as a result of nine out of ten of these taxpayers' returns being amended to include omitted income. Since 2009 we have raised an additional $1.767 billion in this way.
Over 95% of taxpayers who are found to have discrepancies in the income figures in their tax returns report their obligations correctly in subsequent years. This, together with the amount of liabilities raised, provides an indication of the effectiveness of these information matching programs in changing taxpayer behaviour.
This year we detected potential over-claiming or fraud of around 109,000 refunds (less than 1% of the 11.8 million refunds processed). After verification with third party data, 79,000 of these refunds were reviewed. This action protected revenue of around $200 million. (see Protecting the integrity of tax refunds feature).
In 2011-12, revenue attributable to 99% of individuals was collected through our approaches to foster voluntary compliance, while over $1.2 billion was collected as a result of compliance activities, including risk reviews and audits completed since 1 July 2011.
Table 7.1 Active compliance results (Individuals)
|
|
2008-09
|
2009-10
|
2010-11
|
2011-12 YTD
|
Liabilities raised ($m)
|
1279
|
978
|
1198
|
2005
|
Estimated Cash
|
543
|
477
|
667
|
1271
|
Reviews audits and compliance checks completed
|
469,335
|
515,241
|
585,930
|
684,801
|
Paying on time
A small proportion (12%) of individual taxpayers has a tax liability at any point in time.
On-time payment of instalment activity statement liabilities by individuals has remained steady. However, fewer taxpayers are paying income tax return liabilities on time and the total amount of liabilities paid on time has also declined.
While 62% of tax return liabilities are paid on time, on average, 83% of tax return liabilities raised are paid by 30 June in the financial year in which they are due.
Figure 7.4 Payment on time (Individuals)
The percentage of individuals who pay income tax liabilities on time has declined by 10% to 62% - a matter of concern. While the current economic climate may be contributing to this trend, we are undertaking research to better understand the drivers of this decline.
Reflecting the decline in payments on time, the value of collectable debt in 2011-12 was $2.6 billion, up by $938 million from the previous year, although collectable debt payable by individuals was a small percentage (15.9%) of overall ATO collectable debt.
Figure 7.5 Collectable debt summary (Individuals)
We continued to support taxpayers willing to work with us by granting sustainable payment arrangements and remitting certain penalties and interest where appropriate. 2,236 taxpayers were granted full or partial release from payment of tax debts due to hardship.
We also continued to take timely firmer or legal action where individuals were not willing to work with us. For example, the number of garnishee notices in relation to individuals during 2011-12 was up 41.8% compared to 2010-11.
Superannuation
We dealt with around 18,000 complaints from employees relating to unpaid superannuation in 2011-12. The volume of these complaints increased by around 10% from 2010-11 but was still below 0.2% of total employees, as it has been over the last three years. We transferred around $250 million of employer contributions for distribution to member accounts.
We made significant progress in restricting illegal access to superannuation by preventing some funds from entering the system where we had reason to believe they intended to do the wrong thing. We also stopped a number of existing funds from operating where superannuation had been accessed illegally. We audited around 500 scheme promoters and participants of schemes from earlier years and have effectively reduced the opportunities for promoters and individuals to access superannuation illegally.
We issued assessments to around 72,500 individuals who exceeded the superannuation contribution cap, raising approximately $173.8 million in net liabilities. Fewer people are now exceeding their caps, with assessments of excess contributions tax for 2010-11 currently expected to be about 15% lower than for 2009-10.
This downward trend is primarily due to individuals having a better understanding of the rules around contributions.
Sections within Appendix
Last Modified: Thursday, 19 July 2012