ATO compliance targets

Written on the 14 February 2013 by Macmillans Waller Fry

Leading up to the end of the financial year, the ATO has highlighted a number of areas that it will focus on in its compliance activities for small business.

The ATO has divided the small business sector into three segments:

1. Individuals with an estimated worth of $30m+
2. Individuals with an estimated worth of $5m to $30m
3. Small business with turnover of $2m to $250m

Characteristics that attract the ATO's attention are:

• Incorrect claims for work related expenses.  Taxpayers must keep written records of all their work related expenses if their claims are more than $300.
• The ATO is stepping up its use of third party information such as information from suppliers, to identify under-reporting of income.
• Incorrectly treating employees as contractors.
• Analysing the treatment of private company profits, particularly in relation to loan arrangements.
• Superannuation obligations of employers.
• Tax results varying significantly from reported business results.
• Inconsistencies in BAS lodgement claims or spikes in refund claims.
• Sizeable one off transaction amounts.
• Tax and business performance varying significantly from similar businesses in the same industry.
• Unexplained losses.
• A history of aggressive tax planning.
• Weaknesses in compliance structure or processes.
• Tax outcomes inconsistent with the intent of the law.
• Lifestyle not supported by recorded after tax income.
• Business assets used privately and vice-versa.
• Overseas dealings and having complex systems of inter group structures.
• Poor company governance and risk management.
• Performance which falls outside of small business benchmarks.

The ATO's main tool for detecting non-compliance is matching information reported to it by taxpayers and third parties, such as financial institutions both in Australia and overseas.

This financial year, the ATO expects to match over 600 million transactions.

Should you have any concerns about the ATO's tax compliance targets please do not hesitate to contact our office.