Property developers who try and avoid declaring goods and services tax (GST) on the sale of property are more likely than ever to be contacted by the ATO.
In the 2010 Federal Budget, the ATO received additional funding to closely examine GST compliance as part of a dedicated four-year program to improve voluntary compliance and help provide a level playing field for business.
Deputy Commissioner James O'Halloran said, 'The ATO is matching information provided on business activity statements (BAS) and income tax returns with information from the Office of State Revenue and Land Titles Office to identify property developers who are not correctly reporting GST and income tax (including capital gains tax) on property sales.
'We have found some property developers deliberately avoiding their obligations by collecting the GST from the purchaser and then failing to pass this on to the ATO, either by not lodging their BAS, de-registering from the GST system or not reporting sales within their BAS.'
We are also looking at property developers who intentionally remain outside the GST system or claim credits during construction, but then fail to lodge their BAS and individual income tax return.
'These developers are cheating the community and breaking the law,' James said.
'Where we find people who deliberately avoid their tax obligations we will deal with them firmly through application of penalties, interest or even prosecution.
'We are also increasing our focus on taxpayers that continue to use complex organisational structures and insolvency or phoenix type activities to avoid their tax obligations.'
Every property transaction may have a tax consequence. If you think you have undeclared tax relating to a property sale, contact your tax agent or the ATO to make a voluntary disclosure.
More information on GST and property is available from www.ato.gov.au/property.
GST compliance program getting results
Key results for the 2010-11 financial year include:
- more than $290 million raised from additional GST compliance activities
- an additional $150 million in GST debt collected.
Scenario: There's no benefit to concealing information from the ATO
To celebrate the final sale of his townhouse development, George took his construction foreman, Ben, out to dinner.
Over the meal, George offered Ben some advice.
'Look mate, you're a great foreman and you have a keen eye. Get into developing. It's easy money. You buy a block of cheap land, whack some townhouses on it, sell them at a premium price and then understate the value on your BAS. I've been doing it for years.'
When Ben voiced his concerns to George that what he was doing was illegal, George replied, 'Don't worry about me mate. The ATO only go off what you put on your BAS'.
How wrong George was.
With additional funding provided to the ATO from the government the ATO has been progressively expanding its data matching capability. The ATO are now matching BAS and sales data with the Office of State Revenue and Land Titles Offices. It was only a month later when George received a phone call from the ATO that he realised he was in trouble.
In November 2011, George was sentenced to six months imprisonment. He was ordered to repay the $320,000 in GST from the sales of his townhouses and a penalty of $304,000 (calculated at 95% of the tax raised).