ATO Toughens Stance On Big Business And Wealthy Individuals

by Mary Swire, Tax-News.com, Hong Kong

11 June 2003

The Australian Tax Office (ATO) is planning to step up its scrutiny of large corporations and high net worth individuals in the coming financial year, according to tax commissioner Michael Carmody.

Speaking at an Australian Financial Review leaders' lunch earlier in the week, Carmody told attendees that the ATO intends to undertake tax compliance risk profiles on every single organisation considered a big business - which would total some 1,400 firms. In addition to this mammoth task, the commissioner revealed that an additional 320 "more detailed" studies will be carried out on the top 200 firms, and 160 audits will take place on those companies thought to be high risk in terms of compliance.

Carmody also confirmed that some fifty "high wealth individuals" can expect a call from the ATO requiring an audit in the 2003/2004 tax year. "Already this financial year, we have raised assessments for $2.8 billion in additional income tax and penalties from the top end of town and it is expected this will reach $2.9 billion by the end of June," Carmody told the gathering. This exercise has produced an extra $850 million in revenue for the tax office he revealed, estimating that the figure will grow to $940 million by the end of the fiscal year.

The commissioner outlined the signs that the tax office was looking out for regarding tax avoidance, such as unexplained losses or large variations in performance. It will also be scrutinising firms' cross border tax arrangements, especially if the amount of declared earnings for tax purposes is at odds with the level of economic activity. Complex intra-group transactions will also attract the ATO's attention, according to the Tax Commissioner.

Carmody was using the lunch as a platform to promote a new guide book published by the ATO on corporate tax compliance.

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