ATO's Audit Procedures Reviewed

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

08 April 2010

Australia’s Inspector-General of Taxation (IGT) has announced the terms of reference for a review into the audits of high wealth individuals (HWIs) and small and medium enterprises (SMEs) by the Australian Taxation Office (ATO).

It was pointed out that, in the last two years, the government has allocated an additional AUD559m (USD519m) to enhance the ATO’s audit focus. This additional funding will be provided over the period from 2008 to 2013 and is expected to produce increased government revenues of AUD3.28bn.

As a result, the ATO has disclosed that over four years it will review all SMEs with turnovers between AUD100m and AUD250m, and will also increase its compliance focus on HWIs.

“SMEs, HWIs and their representatives have raised concerns in relation to fairness and equity with the ATO’s audits and risk reviews,” the IGT said. “These taxpayers have asserted that they incur significant unnecessary costs stemming from the wide scope of ATO information gathering requests and delays. They have also alleged that ATO audit staff lack sufficient commercial awareness [and] engage in inappropriate conduct.”

It has also been suggested that despite this additional funding, the ATO may not have sufficiently resourced its technical areas (such as the Centres of Expertise and Tax Counsel Network) to adequately deal with the increased workload that these compliance activities may generate for the ATO.

“This review will seek to establish whether taxpayer concerns about SME and HWI compliance activities are justified,” the IGT continued. “It will examine the appropriateness of the ATO’s resourcing, information gathering, initial compliance decisions, management of technical issues, project management and conduct in SME and HWI reviews and audits. This will provide a basis for conclusions to be drawn and recommendations of best practice for these compliance activities.”

The IGT is, therefore, seeking taxpayer submissions which detail accounts of SME and HWI experiences in dealing with ATO compliance activities, such as audits and risk review products.

The IGT assured taxpayers that “all submissions and identities will be kept strictly confidential and will not be disclosed to anyone, including the ATO. I strongly encourage interested parties to use the terms of reference in preparing their submissions. My aim is for balanced thinking on the issues to lead to better outcomes for both tax administration and taxpayers alike.”

The closing date for submissions is May 31, 2010.

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