The Compliance Program details the many compliance issues the Tax Office faces in managing Australia’s revenue systems. It also details our responses to managing those issues.
Access a pdf version of the Compliance Program 2003-04. You can also access a pdf version of the Compliance Program 2002-03.
Australia’s revenue collection system generally relies on taxpayers assessing their liability under the law and paying the correct amount of tax to the government through the Australian Taxation Office.
This system of self-assessment – with its associated periods of review – has inherent risks. We manage these by balancing our resources accordingly to ensure that people are meeting their obligations.
The Compliance program 2003–04 describes these risks and how the resources of the Tax Office are used to treat them.
In publishing these risks and what we are doing about them, the Tax Office is demonstrating that the tax system is being managed in an open and accountable way, and that we are balancing education and enforcement functions in a way that is acceptable to the community and sustainable in the long term.
We invite feedback on how this is being achieved.
As well, wherever possible, we engage community representatives and other specialists in decision-making forums, including rulings panels and accountability and integrity committees.
Our environment
The dynamic and volatile nature of the world financial system continues to influence much of what we do. International transactions – by individuals and giant corporate groups – continue to demand our attention and resources.
Tax planning remains a feature of the tax environment. Complex business structures and innovative financial products, sometimes driven by a perceived tax ‘benefit’, challenge us to see that participants pay the correct tax due under the law. We are continuing to see promotion of highly aggressive strategies and schemes designed primarily for tax purposes. As a general rule, we caution – ‘If it looks too good to be true, it probably is!’
We have seen a growth in the number of individuals claiming work-related expenses and deductions for rental properties. Income is being derived from an increasing number of sources – many taxpayers have several jobs, and many others receive income from multiple investments or superannuation, or operate a business. These complexities, and the variety of family relationships, make claiming deductions and entitlements difficult and prone to error for some in the community.
We are paying close attention to the few people who deliberately flout their obligations, including those who attempt to take themselves outside the tax system. We have created a new area that draws together our ability to handle serious non-compliance. This area deals with revenue fraud (including excise evasion), people operating outside the tax system, and other serious non-compliance practices.
The number of interactions between the Tax Office and the community has increased as part of the design of the new tax system. Within that framework, we are looking for ways to ease the cost of compliance.
Tax agents have a vital role in a healthy revenue collection system. Nearly all businesses use a tax agent to calculate and lodge their tax returns, while around 75% of individual taxpayers use a tax agent. We have worked closely with agents to better recognise their role and make their interactions with us easier.
Managing revenue
Revenue is managed through a number of collection systems: income tax, goods and services tax (collected by the Commonwealth on behalf of state and territory governments), superannuation and excise. The Tax Office also administers a range of benefits and refunds, including the Baby Bonus, income tax and GST refunds, excise grants, family tax benefits and superannuation guarantee transfers.
Income tax is the largest of the revenue systems we administer. It includes personal tax, company tax, capital gains tax and taxation of superannuation funds (including the superannuation contributions surcharge). It is estimated that income tax will account for around 75% of total Commonwealth revenue collections in 2003–04.
GST is a broad-based tax of 10% on the supply of most goods and services in Australia. There are 2.2 million businesses registered for GST, including charities and other non-profit organisations that previously had no tax obligations or dealings with the Tax Office. In 2003–04 the Federal Budget estimate for GST collections is $31.7 billion.
We play a significant role in administering the superannuation system, which now has around $508 billion in superannuation fund assets under management. Our role includes administering the superannuation guarantee and regulating self-managed superannuation funds, as well as continuing to implement a range of new government policies announced in 2001–02.
Excise duty is levied on the domestic production of alcohol, tobacco and petroleum products, generally based on their volume. The excise system also delivers fuel grants and administers the product stewardship (oil) scheme. We also administer wine equalisation tax, a value-based tax imposed on the wholesale price of wine. Excise accounts for around 13% of Commonwealth revenue.
Our general approach
Our administration of the tax system is based on providing help and education to support taxpayers to self-assess their liability. We also conduct a range of compliance activities, ranging from verifying information supplied to undertaking complex audits, and take appropriate action where we detect deliberate non-compliance. In addition, we work closely with industry members and their representative bodies to manage a range of issues.
We also continuously monitor expected revenue outcomes and the implementation of major changes to the revenue systems to identify emerging risks. This means we may undertake reviews or enquiries before relevant returns or forms are lodged, or assessments are issued.
We actively communicate areas of risk and concern so that people understand our position and the response they can expect from us.
The Taxpayers’ Charter and Compliance Model guide our compliance actions.
The charter is about being open and fair in our treatment of people, within the framework set by the law. It directs the way we behave towards the community, and what the community can expect from us.
The Compliance Model directs that we better understand why people are not complying, and that we develop appropriate and proportionate responses. An underlying objective is to develop responses that maximise the proportion of the community who are both able to, and choose to, comply.
Market segments
Because the taxpaying community is made up of vastly different groups with varying characteristics and circumstances, we break it up into five segments:
- individual taxpayers
- micro-businesses, with an annual turnover of less than $2 million
- small to medium enterprises, with an annual turnover of between $2 million and $100 million
- large businesses with an annual turnover of $100 million or more, and high wealth individuals, and
- non-profit and government organisations.
We complement this focus with compliance analysis of the various taxes we administer.
Using this booklet
This booklet describes the five market segments and the compliance issues affecting each segment.
It then outlines a number of key features we are focusing on this year that affect the various segments, namely:
- evasion and fraud (including the cash economy)
- aggressive tax planning
- international tax issues, and
- overdue debt and late or non-lodgment.
We suggest you identify which market segment relates to your circumstances and look at the compliance issues identified for that segment. Then turn to the featured issues for more detailed information on our approach to compliance. Tax agents are encouraged to read the section dedicated to agents and the segments relevant to their client base.
Contact information
For printed copies of this booklet phone 1300 720 092.
Please email your comments to compliancefeedback@ato.gov.au, or write to Compliance feedback, PO Box 655, Civic Square ACT 2600
© Commonwealth of Australia 2003
This work is copyright. You may reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Apart from any use as permitted under the Copyright Act 1968, all rights are reserved. Requests and inquiries concerning reproduction and rights should be addressed to Commonwealth Copyright Administration, Department of Communications, Information Technology and the Arts, GPO Box 2154, Canberra ACT 2601 or by email Commonwealth.copyright@dcita.gov.au
Last Modified: Wednesday, 7 January 2004
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