Australian Businesses Be Warned: The Tax Man Cometh

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

20 June 2003

Australian accountants and tax experts are advising businesses to be on their guard as they report signs of a long feared offensive from the Australian Tax Office (ATO).

After a decade or so of relative inactivity by the ATO auditors, observers are saying that even compliant small firms are being targeted by the tax man for GST reviews. One tactic the tax office is employing is accessing business activity statements (BAS) to target firms for potential audit, says Grant Burgess, a tax partner at accountants BDO.

"The ATO now has very sophisticated data after nearly three years of BAS statements, and a number of our clients have recently been approached for reviews. If you can't answer the questions, the taxman decides to take a closer look," said Burgess to BRW.com, adding: "The anecdotal evidence is that the tax office is flexing its muscles"

Other signs that the ATO is setting off on the war path is an increasing number of applications for wind up orders by the ATO published in the law lists of local newspapers according to David Purcell, principle of Purcell Insolvency Lawyers. "That's an immediate sign of greater activity" commented Purcell.

Recent statements by the ATO's assistant commissioner for small business, Annette Chooi, would appear to substantiate the tax expert's suspicions. According to the ATO official the department has recently taken on extra staff numbering "in the hundreds" and has begun to concentrate less on education regarding the GST system and more on compliance. "It hasn't been a radical shift but has been in progress for some time," obeserved Chooi.

For Burgess, Chooi's remarks fit perfectly into place with the evidence he is seeing on the ground. "The tax office is like the Queen Mary. It takes a while to turn it around. Now it has, and it will now stay on this course for years to come. It's no more Mr Nice Guy."

Discrepancies the ATO is keen to spot include inadequate records of labour and supplier payments, improper tax minimalisation, and failing to account for GST on disposal of assets.

Speaking at an Australian Financial Review leaders' lunch last week, ATO commissioner Michael 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 2000 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.

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