The Government has developed a package of three measures to improve tax compliance across various aspects of the economy. This will create a more level playing field for taxpayers and support the Government's ongoing commitment to ensure that everyone pays their fair share of tax.
"What we want is a tax system that reinforces respect for government tax collection by not only being responsive to taxpayer needs, but by displaying effectiveness. This respect will, in turn, improve tax compliance," the Assistant Treasurer, Bill Shorten said.
Tax compliance – Reporting taxable payments
This measure has two components aimed at improving compliance with taxation obligations by contractors.
Some contractors appear to be unaware of their existing tax obligations or deliberately under‑reporting their tax. The Government will therefore introduce a requirement for certain businesses in the building and construction industry to report to the Australian Taxation Office (ATO) annually on payments made to contractors in the industry, along with the contractor's ABN, with effect from 1 July 2012. Businesses will generally only be required to report information that they should currently record as part of their existing obligations.
'The reporting regime will allow data‑matching to provide information for review, targeted audits or further assistance and education. This will help ensure a more level playing field within the building and construction industry and improve voluntary compliance,' the Assistant Treasurer said.
The Government will also undertake public consultation during 2011-12 to examine a reporting regime for payments made to contractors in the commercial cleaning industry.
The ATO will be funded to implement the reporting regime and to assist with educating the industry about the new regime and their tax obligations.
Tax compliance - Enhanced fraud detection and management
There is evidence that the system of tax refunds is being abused by some taxpayers. The ATO will therefore focus on preventing instances of over-claiming before refunds are issued. The additional funding will also allow the ATO to conduct additional business education and/or enforcement activities and develop further intelligence and analytic detection models.
'Refund fraud is a compliance risk with the potential to undermine community confidence in the integrity of the tax system,' the Assistant Treasurer said.
The Government will provide additional funding to the ATO to address a substantial increase in fraudulent tax refund claims.
This measure delivers on the Government's election commitment.
Tax compliance - Reporting Government grants and payments
Some recipients of Government grants and payments may be unaware of or avoiding their tax obligations. The ATO will therefore monitor and collect payment information from government agencies across all three levels of government, and will develop more sophisticated data-matching capacity to examine compliance by the recipients of Government grants and payments.
'It is important that the recipients of Government grants and payments properly account for these payments,' the Assistant Treasurer said.
This measure delivers on the Government's election commitment.