How to stay in the taxman’s good books

– Look at business owners using loans, payments and debt forgiveness to distribute private company profits to shareholders or associates without paying the correct amount of tax.
– Examine compliance of untaxed private company distribution provisions.
– Ensure FBT treatment of motor vehicles and super guarantee is correct.
– Examine business restructures focussing on exit and succession planning arrangements.

• Capital gains tax – The ATO says it will seek to ensure CGT is correctly applied, with a particular focus on ensuring capital losses are not offset against income. The ATO says it will also:

– write to those developing properties, before they lodge their returns, to help them determine how to report their assessable income so they don’t incorrectly claim the CGT discount;
– review claims for rollover exemption and pre-CGT status on share disposals.

• GST – The ATO plans to focus its GST compliance activities on:

– Property transaction audits focussing on unreported sales, correct application of the margin scheme, correct GST treatment of commercial and residential premises and retirement villages.
– Ensuring businesses correctly claim GST credits and focussing on businesses failing to report correctly.
– Businesses with cross-border transactions.
– Reviewing refund claims for transactions made more than four years ago.

• Lodgment issues – the ATO plans to improve lodgment for entities with turnovers between $100 million and $250 million, highly wealthy people, industries and sectors with higher rates of non-lodgment and late lodgment, and previously compliant businesses.

New ATO guide for SMEs

In passing, and still on a compliance theme, I notice that the Tax Office recently released a program designed to help small businesses check whether their business practices are helping them meet their tax obligations. The program Is your business tax-ready? is a free download from the ATO (note that it is a 35.5MB download). SMEs could find this a useful tool to at least give them an indication of how they are doing tax-compliance wise.

Take note of the ATO’s early warnings

The tax compliance scene is always busy and always changing. The transparency offered by the Tax Office each year when it releases its compliance program is a two-way street. The Tax Office gets to warn taxpayers and businesses of what issues it has concerns about, in the hope that taxpayers will make sure they are correctly complying, and the program also provides businesses with an illustrative checklist of tax issues they need to make sure they attend to. Forewarned is forearmed, as the saying goes, so SMEs should make sure they have their tax houses in order.

Terry Hayes is the senior tax writer at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.