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  • Schedule D: Budget measure – GST Voluntary Compliance Program

    In the 2015 Budget, with the support of the states and territories, we received additional funding for the GST Voluntary Compliance Program, extending the program for a further three years to 2018–19. The program allows us to better identify fraudulent GST refunds, under-reporting of GST liabilities, failure to lodge GST returns and outstanding GST debts. The intent is to deter fraud and evasion and help people understand the heightened risks that accompany deliberate non-compliance. The result is improved voluntary compliance, willing engagement with the tax system and a level playing field for Australian businesses. During the first six years of the program we have focused on four key areas (quadrants) achieving positive outcomes for revenue and influencing compliance behaviour.

    The program has been extremely effective in meeting its revenue commitments, with those commitments exceeded in each year of the program. At 30 June 2016 (the end of year six of the program), an estimated $3.59 billion in compliance liabilities have been raised compared to a commitment of $2.41 billion. Including debt collections, an estimated $5.11 billion in additional GST has been collected from the start of the program to the end of 2015–16, compared to the total six-year commitment of $2.33 billion.

    GST debt collections through the program continued to significantly exceed commitments in 2015–16 with $354.1 million collected. The level of GST debt collected was consistent with previous years of the program, with the exception of 2013–14 when an Early Collections campaign noticeably increased GST collections in that year.

    Table 6: GST Voluntary Compliance Program outcomes 2015–16

    Item

    Quadrant

    Program activities

    Program outcomes

    1.  
     

    The detection and reduction of inflated or fabricated GST refunds

    • enhanced refund risk models and expanded fraud detection capability to focus on higher risk refunds
    • refined registration risk models to detect registrations which were either unnecessary or potentially fraudulent
    • conducted pre-lodgment checks on new GST registrations which appeared to be of high risk
     
    •  improved detection of fraudulent refund claims has forced potential taxpayers to change their modes of operation
    • conducted around 30,000 checks on suspect GST registrations to identify unnecessary or potentially fraudulent registrations
    • approximately 1,800 GST roles were cancelled and a further 1,600 registrations were referred for Enterprise checks
    • improvements to suspect refund risk models led to better targeting of cases and higher strike rates
    • GST revenue from suspect refunds cases was around 35% ahead of the YTD target mainly due to the higher than expected strike rate
     
    1.  
     

    The investigation of systematic or deliberate under-reporting of GST

    • referred additional cases for further investigation where collection was deemed unlikely based on the history and behaviour of the taxpayer
    • introduced and implemented new strategies focused on addressing phoenix property developers
    • increased active compliance activities focused on systematic or deliberate under-reporting of GST
     
    •  completed over 2,000 audits for serious evasion of GST liabilities (including 1,255 relating to disengaged property developers)
    • more property developers who are identified as high risk are reporting their sales and paying the GST they owe
    • while the incidence of non-compliant behaviour has not changed significantly, we are more effective at detecting and dealing with the behaviour
     
    1.  
     

    More direct contact with non lodgers

    • increased targeted and personal interaction with non-lodgers and late lodgers through reminders and enforcement action where required
     
    •  the trend in monthly on time lodgment has improved however there has been a decline in quarterly on time lodgment rates
    • taxpayers subject to a lodgment enforcement activity show a significant improvement in future lodgment behaviour
    • GST revenue exceeded full year plan by 62% mainly due to the Early Intervention strategy
     
    1.  
     

    More direct contact with taxpayers who have a GST debt

    • increased the use of early collection approaches and referral of debt cases to external collection agencies
    • increased activities focused on aged debtors to address the flow of cases into aged debt holdings
    • increased activities focusing on the collection of significant debts
     
    •  revenue collection results from debt collection activities far exceeded the program commitments in 2015–16 with $354.1 million collected
    • the level of GST debt collected was consistent with previous years of the program
    • taxpayers subject to an audit or debt case show an improvement in their future behaviour
    • ratio of GST collectable debt to GST revenue collections has decreased in the past three years, reversing a long term trend where this ratio had been increasing
     
    Table 7.1: Budget measure compliance results (Years 1 to 6)

     

    Years 1 to 5

    Year 6

    Item

    Quadrants

    2010–11 to 2014–15 (Planned)

    $ million

    2010–11 to
    2014–15 (Actual)

    $ million

    2015–16 (Planned)

    $ million

    2015–16 (Actual)

    $ million

    1 The detection and reduction of inflated or fabricated GST refund claims $659.2 $858.2 $136.3 $184.5
    2 Investigation of systematic or deliberate under-reporting of GST $432.5 $478.7 $193.4 $163.7
    3 More direct contact between the ATO and non-lodgers $884.1 $1,318.7 $107.5 $587.1

     

    Sub-total $1,975.8 $2,655.6 $437.2 $935.3
    4 More direct contact between the ATO and taxpayers with a GST debt $377.4 $2,524.7 $39.2 $354.1
    Table 7.2: Budget measure compliance results (Years 7 to 9)

     

    Year 7

    Year 8

    Year 9

    Item

    Quadrants

    2016–17 (Planned)

    $ million

    2017–18 (Planned)

    $ million

    2018–19 (Planned)

    $ million

    1 The detection and reduction of inflated or fabricated GST refund claims $275.5* $257.7* $248.6*
    2 Investigation of systematic or deliberate under-reporting of GST
    3 More direct contact between the ATO and non-lodgers $241.1 $374.9 $456.1

     

    Sub-total $516.6 $632.7 $704.7
    4 More direct contact between the ATO and taxpayers with a GST debt $213.0 $192.0 $171.0
    * As part of the 2015 Budget extension, quadrants 1–2 will be combined in years 7–9.

    Six year results by quadrant

    Quadrant 1

    Six year results by quadrant The data that built these four graphs, showing the 6 year plan and actual outcomes of the budget measure compliance results by quadrant is detailed in the above table 7. Quadrant 1 -3 – These graphs show end year plan and actual figures are represented in liabilities raised as a result of audit activity.  Figure_for-table7.2.1-budget-measure-quad-1

     Figure_for-table7.2.1a-budget-measure-quad1

     

    Quadrant 2

    Figure_for-table7.2.1-budget-measure-quad-2

    Figure_for-table-7.2.2a-budget-measure-quad-2

    Quadrant 3

    Figure_for-table7.2.1-budget-measure-quad-3

    Figure_for-table-7.2.3a-budget-measure-quad-3.GIF

    Quadrant 4

    Figure_for-table7.2.1-budget-measure-quad-4

    Figure_for-table-7.2.4a-budget-measure-quad-4

    Notes:

    • Totals may differ from the sum of components due to rounding.
    • Quadrants 1–3: end year plan and actual figures are represented in liabilities raised as a result of audit activity.
    • Quadrant 4: end plan figures are represented in cash collections as a result of debt collection activity.
    • Before 2013–14, the quadrants were described as:
      • Working together in defending our citizens’ tax system against organised attacks and fraud
      • Promoting a level playing field for Australian business and investors
      • Supporting citizens in their tax system
      • Paying your fair share of tax – a hallmark of good citizenship
          
       

    Figure 2: Estimated GST cash collections

    Figure 2 – Estimated GST cash collections graph This graph shows the planned and actual GST cash collections for the financial years 2010–11 to 2015–16. The actual GST collection results exceeded the plan in each year. In 2015–16 the plan was to collect $384.0 million and we actually collected $923.0 million.

    * The previously published 2014–15 actual cash collections figure ($978.0 million) has been amended as we identified an error in our reporting methodology.
     

    GST liabilities raised through lodgment enforcement work in 2015–16 were the highest in the program to date at $587.1 million. In addition to the liabilities raised as a direct outcome of the lodgment enforcement strategies, an additional $79.4 million in indirect GST liabilities were raised because of improved ongoing lodgment performance as influenced by these strategies. An additional $588.9 million in GST liabilities has been raised during the life of the program due to the ongoing impact of our lodgment enforcement strategies.

    Table 8: GST Voluntary Compliance Program case workloads

    Quadrant

    Interaction type

    2015–16 Plan

    2015–16 Actual

    2010–11 to 2015–16 Plan

    2010–11 to 2015–16 Actual

    1. Suspect refund cases 10,340 21,620 62,930 75,182
    2. Incorrect reporting cases 4,443 455 8,886 5,377
    2. Disengaged property developer cases 1,632 1,255 4,230 6,783
    2. Serious evasion cases 332 771 2,701 2,517
    3. Lodgment contacts 2,117,494 1,120,014 12,698,724 8,609,575
    3. - Strong enforcement cases 15,694 278,699 87,924 939,080
    4. Debt cases referred to external debt collection agency 125,000 127,370 1,050,000 898,788
    4. Aged debt cases nil nil 102,120 121,465
      Last modified: 20 Apr 2017QC 51810