Tax targets for 2007-08

Will you be on the taxman’s hit list this year. Tax commissioner Michael D’Ascenzo today announced who can expect special attention. By JACQUI WALKER.

By Jacqui Walker

Will the taxman be targeting you this year? Today in Sydney, tax commissioner Michael D’Ascenzo announced who will be in the ATO’s sights in 2007-08.

The ATO has identified five headline issues for the 1.9 million micro businesses – those turning over less than $2 million.

Debts. Michael D’Ascenzo announced that the tax office will be using the extra $125.7 million (over four years) it received in the May budget to chase micro businesses for tax debts more than two years old, and unpaid superannuation guarantee levies.

Cash economy. The tax office will look harder at the cash economy. It will pay more attention to business-to-consumer transactions and responding faster to tip-offs from the public and third parties, especially where the business operator’s lifestyle is out of kilter with their returns.

Audits. There will be more audits of micro businesses to ensure employers meet their obligations to pay PAYG, super and fringe benefits tax. There will be more tools, education and support on this as well.

DIY super. As SmartCompany.com.au reported earlier this week, there will be more audits of self-managed superannuation funds because of the strong growth of DIY super.

Education. There will be a new focus on providing education and assistance for small business at critical points in the business lifecycle. There will be more advice on start up and registering for GST. “We are significantly changing and improving our assistance program for small business,” D’Ascenzo said.

The tax office has redefined its categories of business sizes to group together small and medium companies, with $2–250 million turnover. Previously, small had been $2–100 million and medium $100-250 million. 

Paul Drum, director policy and research CPA Australia, says the extra $150 million only picks up an extra 1000 companies and it’s likely they will get more attention from the tax office now that they have slipped out of the big league where they may have fallen under the radar.

The tax office will do 390 audits and 460 reviews focusing on issues including capital gains tax, losses and wealth extraction. It will contact 2500 SMEs to verify FBT and income tax issues and do 6000 checks on income tax returns where claims for refunds appear excessively large.

There are three headline issues for small and medium businesses for the tax office:

High wealth individuals

The tax office says there will be a stronger focus on individuals with net worth of more than $30 million, with particular attention on non-disclosure and under-reporting of capital gains, or transactions involving the concealment of assets and income, and the abuse of tax concessions (such as the capital gains discount on the sale of a small business, for instance, or trying to manufacture a transaction for it.)

Accessing business profits

There will be scrutiny of schemes where taxpayers get access to business profits without paying the correct tax, particularly in the context of the changes to the shareholder loans laws.

Business exit strategies

The tax office will pay extra attention to business exits. With intergenerational change and the ageing population and the increase in exits, the tax office will be identifying high-risk taxpayers and trying to raise awareness of the issues.

For more detail on the 2007-08 Compliance Program see the ATO website.