On 17 August 2004, the Tax Commissioner, Michael Carmody released the Australian Taxation Office's Compliance Program for 2004/2005.
An overview of this program is reproduced below from Media Release: Nat 04/061.
- Around 6.5 million people claimed $9.8 billion last year, up 4.5% on the previous year.
- We will write to over 200,000 people before they lodge their income tax returns to tell them about our areas of concern.
- 35,000 people will be asked to provide more information with their return.
- We expect to select 12,000 high-risk cases for follow-up audits.
Rental income and expenses
- 1.3 million people declared rental income of $13.7 billion and claimed rental deductions of $14.9 billion in 2002-03, up 8% and 13% respectively on the previous year.
- We will write to 37,000 people before they lodge their returns advising them of areas of concern.
- 4,600 rental income and expenses schedules will be reviewed and where necessary an audit undertaken.
Capital gains tax
- 765,000 individuals declared $6.2 billion in net capital gains from shares and property sales in 2002-03.
- Net capital gains declared increased by 5% however the number of individuals declaring capital gains was down by 27%.
- We will compare 24,000 individual returns with share and property sales data.
- We expect to conduct over 2,500 highly targeted audits in this area, and we will write to a further 3,800 people about whether a capital gain should be included in next year's return.
Interest, dividend and employment income
- Last year using data-matching we reviewed more than 125 million transactions for 8.7 million taxpayers.
- We followed up 265,547 individuals where our reviews showed income that did not appear in returns and found undeclared income of $130.3 million.
- This year we expect to contact 350,000 individuals, resulting in $169 million in undeclared income.
- This year we expect to review around 37,000 high-risk refunds.
- We are continuing 155 risk reviews of involvement in tax havens and an additional 80 will be started this year.
- We will follow-up 32 high-risk cases for audit.
- We will undertake 1,450 audits involving foreign source income detected through data matching.
- We will enforce lodgement of 9,000 income tax returns by high income earners.
- We will make direct contact with 500,000 individuals whose superannuation fund has reported them as 'lost'.
- We will write to each member who has not quoted their TFN to their super fund where we suspect their income has exceeded the surcharge threshold.
- We will amend the income and super surcharge assessments of around 4,000 individuals who failed to report fringe benefits.
Micro business and Small to medium enterprises
Income tax and pay as you go withholding compliance
- We expect to review around 800 businesses for compliance with income tax and PAYG withholding. Of these, around 580 will be audited.
- We are continuing to focus on good record-keeping practices.
- Where we visit a business and find poor record-keeping practices we will make a return visit - we plan around 1,500 return visits to businesses this year.
- We expect to contact around 73,700 micro businesses about cash economy issues.
- We will be looking closely at 'low-documentation loans' where income disclosed to lenders is substantially higher than that disclosed in tax returns.
Incorrect or fraudulent claims
- We plan to check more than 69,000 GST refunds and 18,000 income tax refunds this year.
- We will check the accuracy of 9,200 activity statements by either a phone call or a visit.
- We will write to 4,200 people as a result of information received from the community.
- We expect to do around 500 audits relating to serious non-compliance.
- We expect to audit around 400 micro businesses to ensure they meet their pay as you go withholding obligations.
- We plan to review around 480 to ensure they have met fringe benefits tax obligations and, of these, 180 will be more comprehensively audited.
- We will review around 400 arrangements that may involve alienation of personal services income particularly in relation to income splitting and allowable deductions.
- We will investigate each case where an employee tells us that their employer has not paid the proper amount of superannuation on their behalf.
- We will conduct 1,900 phone enquiries and around 2,400 field reviews.
- We will conduct 200 reviews of eligible termination payments to ensure they have been properly reported.
- We expect to review 7,200 claims for losses that may not be eligible to be claimed in the current year.
Self managed super funds
- We will be adding extra checks to the registration process for new self managed super funds to confirm the integrity of new trustees.
- We expect to review about 200 funds this year to focus on income tax compliance issues.
- We expect to review another 200 funds to check that eligible termination payments reported in tax returns were properly reported when paid by the funds.
- We will be undertaking a range of education and compliance activities targeting 100 tobacco retailers.
International tax issues
- We expect to audit 48 high-risk cases involving the use of tax havens.
- We expect to complete 399 reviews asking people to complete a questionnaire about their international dealings.
- We expect to conduct about 100 risk reviews of profit-shifting arrangements and to commence 20 audits in this area.
- We expect to examine 30 cases involving foreign tour operators and where necessary adjust their activity statements.
- We expect to do about 20 audits and about another 200 risk reviews of SMEs that deal with entities based in tax havens.
Large one-off or unusual transactions
- Data analysis shows some businesses are not reporting and paying GST on unusual or infrequent transactions such as disposal of business assets.
- We intend to review 700 cases through fieldwork and issue 1,500 letters to businesses that have disposed of assets.
Large omissions of GST and incorrect input tax credit claims
- We intend to audit 130 businesses where we suspect that there is a failure to report and pay large amounts of GST, where a business is claiming false or unsubstantiated input tax credits or where there are artificial arrangements.
- We expect to check 13,000 GST input tax credit refunds, 11,900 by phone and 1,100 through field audits.
- We expect to check about 3,700 income tax returns to request that seemingly excessive claims are substantiated.
- We expect to conduct about 1,600 income tax reviews and about 100 GST reviews of businesses with a turnover of more than $20 million.
Aggressive tax planning
- Our focus is on boutique arrangements such as offshore structures to avoid tax.
- We expect to audit 20 promoters, examine 100 employee benefit arrangements and review a further 25 arrangements and 40 product rulings.
- We are also examining the tax planning arrangements of 300 businesses where property developers inappropriately use the joint venture, grouping and going concern provisions of the GST legislation.
- We will continue to address phoenix practices, especially in the building and construction industry.
- We expect to undertake about 130 audits and will estimate tax debts in circumstances where, for example, directors are uncooperative.