Opening address
Louise Clarke, Deputy Commissioner Private Wealth, advised the members that the Australian Taxation Office (ATO) is in caretaker mode, acknowledged the federal budget and provided an overview of the ATO's updated vision and purpose.
Environmental scan
The ATO presented an environmental scan using intelligence from recent media and indicators from the industry. Focus areas include key media themes, public advice and guidance (PAG) and litigation updates, debt overview, build to rent new measures, and thin capitalisation and debt deduction creation rules.
Members discussed the ATO debt position and drivers of unpaid debt, build to rent misuse tax and the significant impacts this can have on the viability of projects and observed recent ATO reviews have had a focus on property development agreements.
Master Builders Australia
Master Builders Australia’s forecasts were published in April 2025 and cover the period up to 2029–30.
Forecasts have been compiled for each of the 8 states and territories.
Over the 5 years to 2029–30, Master Builders Australia forecasts that $1.60 trillion worth of construction work will be carried out.
On average, this would represent a 21.5% increase when compared to activity over the last 5 years.
Engineering construction is likely to see the strongest growth and new home building is expected to recover from its recently weak levels.
Master Builders forecasts that around 1,040,200 new homes are likely to commence construction over the 5-year term of the National Housing Accord, representing a shortfall of about 160,000 homes relative to the Accord’s 1.2 million target.
The non-residential building market is anticipated to see around $301 billion worth of work over the next 5 years, equivalent to 4.5% more per year compared with what was achieved in the last 5 years.
Property Council of Australia
The national confidence level increased from 108 to 116 index points over the December quarter.
At a national level, economic growth expectations increased by 12 index points but remained in negative territory. NSW and WA were the only states to report positive national economic growth expectations.
Respondents in all markets expect interest rates to decrease over the next 12 months.
Construction activity expectations increased in all sectors over the quarter.
Housing supply and affordability remained the most critical issue for the Federal Government according to 39% of respondents.
Australian Securities and Investments Commission
The upward trend in external administration appointments (EXADs) continues this financial year with 9,429 companies entering external administration during the first 8 months of the 2024–25 financial year, up 42.6% from the 6,611 companies recorded for the same period in 2023–24.
As of 28 February 2025, the main industries were:
- Construction 2,308 (24.4%)
- Accommodation and food services 1,598 (16.9%)
- Other services 988 (10.5%)
- Professional, scientific and technical services 644 (6.8%)
- Retail trade 529 (5.6%).
As of 28 February 2025 there were 3.485 million registered companies. The ratio of companies entering external administration in the 12 months to 28 February 2025 compared to the number registered (0.40%) is up from the 12 months to 29 February 2024 (0.29%) but still well below the prior peaks in the 2011–12 and 2012–13 financial years of 0.56% and 0.53%, respectively, when the number of registered companies was around 2 million.
Small business restructuring (SBR) appointments have increased by over 200% with 1,874 appointments for the first 8 months of the 2024–25 financial year compared to 666 appointments for the same period in 2023–24. SBR’s now account for over 20% of companies entering external administration.
Australian Securities and Investments Commission statistics taken from reports lodged by registered liquidators show construction industry EXADs are not dissimilar to all EXADs with:
- approximately 80% with $100,000 or less in estimated assets and liabilities between $100,0001 and $5 million
- over 75% had less than 25 creditors
- unsecured creditors in approximately 50% are collectively owed less than $250,000.
- Over 80% do not pay a dividend to unsecured creditors.
More information about the Australian Securities and Investments Commission is available at Insolvency StatisticsOpens in a new window.
Members queried if the ATO is instigating more windups. The ATO advised that while insolvencies levels are trending upwards, these are generally self-initiated, that is, not ATO initiated.
State of the construction industry
The Australian Constructors Association (ACA) provided an overview of the current state of play in the construction industry as seen by the ACA membership which comprises Tier One contractors in the vertical and infrastructure space. Key observations include:
- construction industry is at a crossroads with several troubled projects
- significant insolvencies at the subcontractor level which create stress on the supply chain
- impact on industry as construction goes into demand for housing, defence, Qld olympics
- government assistance/support still required to industry
- fairer risk apportionment is needed for matters outside control of parties in the contracting industry.
Members discussed reflections on how regulators could consider how to better support the industry where projects may be troubled, particularly at critical times where subcontractors in projects are financially impacted from stress in the supply chain. An example was raised about how one regulator was able to improve engagement and how they were viewed by the industry.
Compliance issues in the SB and PW markets
The ATO provided additional information from the focus areas discussed at the 10 October 2024 forum around subcontractor compliance. This included discussion about the Head Contractor Dashboard and how contractors who receive can better understand their subcontractor population.
Members discussed the ATO’s focus areas in relation to subcontractors in the Private Wealth (PW) and Small Business (SB) markets.
The ATO provided an update on how the Taxable payments reporting system is performing and the insights it provides.
ATO marketing and communications consultation
The ATO facilitated a discussion topic on the effectiveness of its marketing and communications.
The discussion focused on how to improve the effectiveness of the ATO’s communication within the property and construction industry from both the perspective of which channel of communication is used as well as the content itself.
Members discussed what communications should be prioritised by the ATO over the next 6 to 12 months regarding key topics for the industry and how a more collaborative approach with key industry associations may be considered. The ATO agreed it will explore development of existing communications and tools which could benefit and support the industry.
Serious financial crime taskforce intelligence bulletin
The serious financial crime taskforce (SFCT) has recently published an intelligence bulletin on targeting fraud in GST refunds.
Following intelligence and activities conducted by the member agencies, the taskforce is seeing increasingly frequent and significant occurrences of fraudulent high-value GST refunds.
The behaviours seen range from real businesses inflating invoices and overclaiming to outright fraud using fictitious transactions in attempts to create high-dollar-value refunds.
Significant occurrences of this behaviour are being observed in the property and construction industries.
The ATO is committed to combating GST fraud and ensuring those involved face the consequences.
The ATO is constantly evolving our sophisticated data analytics that help identify and stop GST fraud as it is attempted and support that approach with broader post issue compliance strategies to ensure GST claims are true and correct.
Residential rental properties
The ATO provided an overview of the individuals rentals risk, which relates to landlords failing to declare or misreporting rental income, and misreporting or overclaiming rental deductions.
There are approximately 2.3 million individuals with an investment property. The latest tax gap estimated for individuals not in business is $10.6 billion. Rentals is a prominent risk, with the rental component estimated to be $1.3 billion. In the Random Enquiry Program for 2022, 96% of rental cases had at least one adjustment. There was insignificant variance comparing agent-prepared lodgment to those who self-prepared.
ATO observations indicate that the most common reasons for adjustments to rental items on a tax return are:
- No or incorrect apportionment of the loan interest costs where the loan was re-financed for private purposes.
- Confusion between capital works and capital allowance claims.
- Lack of substantiation for deduction claims.
The ATO is focussed on reducing the tax gap by using third-party data to sustainably improve tax performance. For example, our Special Purpose Acquisition Data program collects data from a range of sources including banks, property managers, insurance companies and bond authorities. By embedding data-driven models and enhancing the lodgment experience through assisted compliance, we aim to reduce errors and administrative burden for taxpayers.
There are several influences on taxpayer behaviour across the property investment lifecycle including real estate agents, mortgage brokers, banks and tax professionals. With 83% of the population lodging through agents, we need to influence compliance by leveraging these relationships and by receiving assistance from key influences.
Employer obligations compliance in the industry
The ATO provided an overview of the common mistakes employers make in the property and construction industry in meeting their employer obligations (PAYG withholding, Single Touch Payroll, super guarantee and fringe benefits tax). These include:
- not classifying workers correctly
- omitting certain payments such as allowances when calculating super
- incorrectly reporting withholding amounts through the payment summary annual reports
- not paying FBT on dual cab ute benefits.
Common mistakes observed when employers classify workers as independent contractors include failing to:
- pay super for independent contractors paid mainly for their labour
- pay super to the right fund or paying directly to workers
- withhold at the highest marginal tax rate when an Australian business number is not provided
- lodge taxable payment annual reports (TPAR)
- keep the right records.
Focus areas include employers who:
- incorrectly classify workers as contractors
- have discrepancies between PAYG withholding or super amounts reported and or paid
- don't lodge or lodge nil FBT returns
- treat all eligible commercial vehicles as FBT exempt without considering whether the private use of the vehicle is limited.
Taxable payments reporting system industries including property and construction are a current focus of our shadow economy program.
Members provided their observations in relation to FBT compliance. Members queried the timing of further educational pieces around payday super. The ATO advised that the exposure draft is open for comments, and that further action will be taken post-caretaker.
Other business
Members discussed potential out of session meetings for priority topics.
Attendees
|
Organisation |
Attendee |
|---|---|
|
ATO |
Amy James-Velagic (Co-chair), Private Wealth |
|
ATO |
Anthony Marvello, Small Business |
|
ATO |
Louise Clarke, Private Wealth |
|
Alvarez & Marsal Australia & New Zealand |
Matthew Evans |
|
Arcem Advisory |
Phil Shepherd |
|
Australian Constructors Association |
Meg Redwin |
|
Australian Securities and Investments Commission |
Carl Sibilia |
|
BDO |
Andres Reith |
|
Chartered Accountants ANZ |
Karen Liew |
|
Frasers Property Australia |
Andrew Compton (Co-chair) |
|
Housing Industry Association |
Melissa Byrne |
|
KPMG |
Anna Chong |
|
Master Builders Australia |
Shane Garrett |
|
Queensland Building and Construction Commission |
Natasha Dennis-Weller |
|
RSM |
Sam Mohammad |
|
The Tax Institute |
Simon Clark |
Guest attendees
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Organisation |
Attendee |
||
|---|---|---|---|
|
ATO |
Alyx Sudall, Private Wealth |
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|
ATO |
Andrew Fenn, Private Wealth |
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|
ATO |
Ben Osborn, Private Wealth |
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|
ATO |
Celeste Salem, Private Wealth |
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|
ATO |
Daniel Carter, Private Wealth |
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|
ATO |
Duncan Harrod, ATO Corporate |
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|
ATO |
Emma Butler, Small Business |
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|
ATO |
Frankie Pantsaras, Individuals and Intermediaries |
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|
ATO |
Jacinta Lawson, Small Business |
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|
ATO |
Louise Hollis, Individuals and Intermediaries |
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|
ATO |
Peta Lonergan, Superannuation and Employer Obligations |
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|
ATO |
Rebecca Anson, Private Wealth |
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|
ATO |
Renee Jones, Frontline Risk and Strategy |
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|
ATO |
Virginia Gogan, Public Groups |
||
|
ATO |
Vlad Dugandzic, Small Business |
Apologies
|
Organisation |
Member |
|---|---|
|
ATO |
Nadia Alfonsi, Public Groups |
|
ATO |
Jill Kitto, Frontline Compliance |
|
Australian Securities and Investments Commission |
Thea Eszenyi |
|
Housing Industry Association |
Alessandra Schladetsch |
|
Pitcher Partners |
Simon Chun |
|
Property Council of Australia |
Matthew Wales |
|
Revenue NSW |
David Allan |
|
RSM |
Adam Crowley |