Andrew Watson, Assistant Commissioner, Micro Enterprises and Individuals provided members with an overview of the Compliance program 2011-12. The compliance program highlights the issues attracting the attention of the ATO, how we will monitor and treat them and the consequences for those unwilling to participate. In particular, Andrew outlined the areas of focus for individual taxpayers as follows:
- Employees and contractors
Evidence has been gathered of where individuals are incorrectly set up as contractors instead of as employees of businesses. As a result these individuals may not report all of their income; they may access welfare payments unfairly, avoiding their fair share of tax and not fulfil other obligations. They also may miss out on entitlements, such as superannuation, leave and workers compensation.
Deductions for work related expenses have increased by around 16% since 2007 and are one of the largest categories of claims made in tax returns. Advisory letters are being issued to help people understand their tax obligations and correctly claim expenses.
There are also a number of guides for specific occupations available on www.ato.gov.au This year the ATO will closely examine claims for deductions made by:
- real estate employees
- carpenters and joiners
- earthmoving plant operators
- flight attendants.
- insufficient documentation to support motor vehicle and travel expenses
- incorrectly claiming home office, mobile phone and internet expenses.
People with overseas income need to be aware of their Australian tax responsibilities. This includes reporting in their tax returns money received as pensions, rent, and interest from bank accounts, dividends and other business income from Australia and overseas. The ATO works closely with the Australian Transaction Reports and Analysis Centre (AUSTRAC), banks and other overseas tax jurisdictions to improve our ability to trace fund flows around the world and identify Australians with income and assets hidden offshore.
To obtain more complete information about offshore income and assets, the ATO has increased the use of exchange of information provisions in Australia's double tax agreements and in tax information exchange agreements.
The pre-filling service helps individuals and tax practitioners get tax returns right by partially completing tax returns with information already provided to the ATO. Individuals still need to check and, if necessary, correct the pre-fill details and add any missing information.
The ATO continually seeks to enhance the information available for pre-filling. For example, share disposals and employee share scheme data will be available for 2011 tax returns.
We will also alert people who have received Australian Government Disaster Recovery Payments that they may be eligible to claim exemption from the temporary flood and cyclone reconstruction levy.
Each year the ATO cross references information reported in tax returns against at least 500 million transactions reported by other parties. Information that we match includes:
- employment, welfare and investment income
- property and share dividends and disposals
- employee share schemes
- foreign transactions and international funds transfers
- superannuation information
- health insurance policies, including level of cover held by an individual.
Some individuals, organised groups and unregistered tax return preparers are making false claims to receive a refund. These claims may arise for a number of reasons, but for others it may include the use of false identity or theft of tax file numbers and personal details.
The ATO uses a sophisticated risk model that helps to detect potentially overstated or fraudulent claims for refunds. In the Federal Budget 2011-12 the government provided $56.4 million over four years for the ATO to continue to expand the work to address fraudulent tax refund claims.
As at 20 July 2011 the ATO had stopped nearly 22,000 returns with total credits claimed of around $85.38 million that are believed to be potentially fraudulent or include overstated refund claims.
- Executives, directors and other highly paid individuals
The ATO reviews the tax affairs of individuals with incomes of over $1 million and in particular their use of closely-held entities, including trusts and self-managed superannuation funds.
This year particular attention will be paid to:
- large deductions, including gifts and donations and the cost of managing tax affairs
- incorrect calculations of net capital gains and losses
- deductions for contributions to self-managed superannuation funds
- claims for large revenue losses
- non-disclosure of partnership and trust distributions
- alienation of personal services income
- non-commercial loans with related entities
- under reporting of employment benefits including participation in employee share schemes.
Meeting discussion
- A member queried the ATO definition of a contractor. Meg Haseldine, Senior Director, Employer Obligations, Micro Enterprises and Individuals provided the following response.
As there is no definition of 'contractor' in tax law, the ATO uses the common law definition which is generally understood to be somebody who runs their own business providing services to other businesses. There are a range of tools available at the following link, Rates, calculators & tools to assist payers and workers to determine employment status for tax and superannuation guarantee purposes.
- A question was asked about the sensitivities of information matching, for example 'What Australian taxpayer information is shared with other countries?'
Australia has comprehensive tax treaties with over 40 countries which provide for the exchange of information about income earned overseas by Australian residents and Australian income earned by foreign residents. The ATO undertakes data sharing exercises with those countries that are treaty partners with Australia. The data received is matched with what is recorded in a taxpayer's tax return. Information shared between countries is specified in the articles set down in the various double tax agreements. Types of income that are exchanged include:
- salary and wages
- director's fees
- dividends
- interest
- pensions
- rental income
- royalties
- capital gains
- income from independent personal services
- income derived from activities of an artist or sportsman
- business profits.
- It was queried if the e-tax pre-filling service could be accessed by taxpayers who had prepared and lodged their tax returns using TaxPack.
A taxpayer can access pre-filling even if they have lodged their return using TaxPack, providing e-tax for that year is still available (e-tax is available from 1 July to the following 31 May).
When asked if they wish to pre-fill, select 'yes', at which time they will need to verify their identity using a previous year's notice of assessment or an eligible 'shared secret'.
E-tax will then download available data and pre-fill the relevant parts of the tax return, where it can be viewed.
It's important to note that if a tax return has been lodged already, e-tax should not be used to actually attempt a second lodgment or amendment. If a taxpayer identifies they have missed something that should have been in their return, they should advise the ATO by requesting an amendment in writing (instructions on how to request an amendment are on our website or page127 of TaxPack 2011.
- There was discussion about the notion of scams to defraud the government including one member who reported that an acquaintance had been contacted by the ATO for information and was apprehensive about the bona fides of the caller.
It was advised that the ATO may contact taxpayers from time to time by phone but warns that everyone should be wary of unsolicited phone calls claiming to be from the ATO and offering a tax refund. If taxpayers receive fraudulent communication or are unsure of the legitimacy of a communication received which claims to be from the ATO individuals can check by phoning us from 8.00am-6.00pm, Monday to Friday on 13 28 61.
The ATO may also send emails, SMS or post messages on our official social media profiles promoting new services or alerting due dates, for example reminders that tax time is approaching or that a business activity statement is due. However, we will never send an email requesting taxpayers confirm, update or disclose confidential details like name, date of birth, address, passwords, or credit card details.
Sections within Agenda items
Last Modified: Tuesday, 20 December 2011