The ATO is closing in

The ATO is becoming evermore vigilant and sophisticated when it comes to verifying that taxpayers are complying with the tax laws.

Hit list

Each year the ATO releases a compliance program outlining the areas in which it will be both:

	educating the public to help them comply with their tax obligations and
	enforcing the tax law.

This year, as announced in the federal budget, the ATO has been provided with additional funding to extend their operations. Therefore, more taxpayers are likely to fall under the ATO microscope.

The key areas for additional attention are as follows:

	Outstanding tax returns will be more diligently followed up. The ATO will become more aggressive in initiating legal action.
	A greater emphasis on Capital Gains Tax (CGT). This will include using data matching techniques on information supplied from other sources such as the Titles Office for real estate transactions, and share registries.
	Small business CGT concessions will be examined. In particular, the valuations stated by taxpayers to meet the $5 million net asset value test will be tested against current market values.
	Income and expenses resulting from rental properties will be reviewed against industry norms. The ATO may also contact tenants to confirm that claimed maintenance and improvements are legitimate.
	Work expenses will be more closely scrutinised. An education campaign will be implemented by sending over 226,000 letters to taxpayers in a wide range of occupations to inform them of their obligations.

Income matching

The ATO also runs sophisticated income matching software that compares information supplied by banks, financial institutions and other sources with taxpayers’ returns to ensure that interest and dividends are correctly reported.

Last year, around 36 million records were matched raising revenue of $176 million from 320,000 taxpayers who had failed to report income. This year, the ATO expects to check about 40 million records.

Taxpayer responsibility

The ATO is charged with the responsibility of ensuring the taxpaying community fulfil their tax obligations. The Saward Dawson tax team is well equipped to advise on the tax law and your deduction entitlements. You need to be diligent by providing us with all the relevant information. This will enable us to attend to your taxation affairs and protect your interests.

Our experience indicates that audits and reviews need to be carefully managed as misunderstandings can occur. If you are approached by the ATO regarding an audit or review, you should contact your Client Service Manager immediately for assistance.

Published : 7 December 2005