The Government will provide an additional $216.4 million over four years to the Australian Taxation Office (ATO) to address a number of identified compliance risks. This will allow the ATO to better educate taxpayers, raise their level of voluntary compliance and undertake additional compliance activities such as reviews and audits which will result in increased revenue.
These initiatives will also deliver benefits, particularly in the area of taxpayers’ superannuation entitlements. The initiatives are focused in five key areas:
Employer Obligations
The ATO will increase its focus on improving employers’ compliance with their obligations including pay as you go (PAYG) withholding, superannuation guarantee and fringe benefits tax. Data matching, reviews, audits and field verification activities will increase which, combined with additional risk analysis and intelligence gathering, will enable better understanding of compliance issues in these areas. Such activities assist in ensuring obligations on behalf of employees are met, increasing entitlement security as well as the integrity of large tax bases like PAYG withholding.
Compliance of businesses with turnover between $2 million and $100 million
The ATO has observed a significant increase in the complexity of financial arrangements in this sector, particularly in businesses with an annual turnover greater than $50million. Tax performance review activity will increase in this range, in particular assessing the overall tax performance of a business against economic performance. Where appropriate these reviews will lead to follow up audits. The ATO will also target capital gains tax compliance and losses.
Individuals Market for Capital Gains Tax, Rental Deductions, and High Risk Refunds
There is evidence of both genuine mistakes and deliberate non-compliance in a range of areas. The ATO will undertake a major review of existing capital gains tax and rental investment education products to better assist taxpayers to understand their obligations in these areas. The ATO will also increase the number of capital gains tax and rental investment audits and investigate significant high risk refund cases. Risk assessment work in the rental property market has indicated that capital gains is an area requiring additional scrutiny.
Leveraging Compliance through Tax Agents
A significant number of individual taxpayers claimed high levels of work-related expenses last year, with the majority of these claims coming from tax agents. The ATO will continue with its existing work-related expenses compliance program but will increase its focus on the small but significant percentage of agents where there is a high risk of over claiming by their clients and poor return preparation quality controls.
Superannuation
The ATO will expand its audit coverage in the growing market of self-managed superannuation funds. The number of self-managed superannuation funds is growing at a rate of approximately 2,000 a month, and there are currently around 260,000 funds.
The ATO will also focus on reuniting people with their ‘lost’ superannuation entitlements. There is around $7.3billion in superannuation contributions where funds have lost contact with their members.
In addition, the ATO will focus on superannuation surcharge compliance through enhancements to its Tax File Number matching processes. It will also increase its capacity to follow up on employee complaints regarding non-payment of the superannuation guarantee.