This year, the tax office has a firm consensus of which target groups they will be closely scrutinizing. PAYG obligations, trusts, profit shifting, eCommerce and the construction and building industries have all been marked for extra compliance monitoring during the 2013-14 financial year.
Extra inquiries into the misuse of trusts, profit sharing, fringe benefits and unworthy deductions will be prioritized and closely monitored this year as well. Sales and marketing managers need to also stay alert as their particular deductions will be under heavy surveillance this year.
The ATO have devised and confirmed that new technology, such as data matching, will be making their compliance processes even easier. Over the course of the next financial year, the ATO plans to make 640 million matches for transactions, especially for those made by wealthy individuals. Small businesses will not be able to escape this technology either, with the ATO set to make 17,000 ‘employer obligation checks’ in the year ahead.
To add to this list, the ATO plans to also make 1,000 audits of medium-sized enterprises, another 1,000 for wealthy individuals and 2,047 checks for ensuring compliance with GST law.
Even though the ATO is clamping down on numerous areas this coming year; these are the key areas you need to be aware of:
FRAUDULENT INCOME CLAIMS
SMEs activities are being held under the microscope in the ATOs latest bid to catch out those SMEs that are failing to report income and making suspicious concession claims as well.
These seemingly range from small businesses attempting to hide income and operate in the hidden or cash economy to companies inappropriately seeking GST concessions available to businesses.
GST has always been a focus area for ATO compliance, but this year it will be expanding its focus to businesses in the wholesale trade, manufacturing, financial and insurance services and retail industries. It will be encouraging SMEs in high-risk industries to conduct ‘health checks’ on their business systems.
MISUSE OF TRUSTS
As announced in the May budget, a new taskforce has been created for the ATO to utilize in their bid to crackdown on trusts. Almost all of the 700,000 registered trusts out there are used discretionarily for business and investments, but there has been an insurgence of a new type of trust in which participants reduce trust income to direct tax liabilities to others. The ATO plans on making 5,000 matches regarding trusts this financial year.
PROFIT SHIFT AND ECOMMERCE
A continuance of the ATO crackdown among large and medium-sized multinational companies regarding profit sharing will also be a focus for 2013-14.
In conjunction, the tax man is also cracking down on eCommerce businesses, saying it is “looking closely” at the industry’s growth and businesses that might be taking advantage of the circumvent tax laws.
Risk assessment, audit and advance pricing arrangements will help the ATO address profit-shifting behaviour.
In a government bid to catch out any employers attempting to categorise their workers as ‘contractors’, the ATO is investigating more thoroughly those employer’s who are intentionally trying to avoid their tax and superannuation obligations by improperly treating workers as contractors rather than employees. Where non-compliance occurs the ATO will impose penalties.
Employers who fail to meet their fringe benefits tax obligations will also be targeted. The ATO has recently announced that there have been many cases relating to car obligations in which employers have failed to recognise their liabilities.
Those high-income Australians have been targeted for awhile and this year will not prove to be any different.
The ATO have noticed that some individuals with high gross incomes have been avoiding tax obligations. This includes failing to report income, dividends, capital gains and foreign income.
As wealthy individuals usually have quite complex tax structures, including companies, trusts and superfunds, the ATO have found that these structures have at times, been designed to under-report income or not disclose asset sales.
It is common place for the ATO to crackdown on certain industries and businesses every financial year. This year is no different, with the ATO focusing on building and construction labourers, construction supervisors and sales and marketing managers as their key targets.
More so than in previous years, the ATO will be closely examining work-related travel expenses. In the past, incorrect claims have included basic errors, incorrect advice and poor record keeping.
To ensure you are claiming the right deductions or for more information on any of the above matter, contact one of our expert accountants today!