The Tax Commissioner said the ATO’s information matching program is expected to match over 600 million transactions in the current year (up from 538 million in the 2011-12 income year). He said commensurate with the increase in information matching, the ATO also expects an increase in the number of discrepancies identified. According to the Commissioner, discrepancies detected by ATO information matching increased from 266,000 in 2007-08 to over 540,000 in 2011-12.
Specifically in relation to small businesses, the Commissioner said the records of more than 10,800 taxpayers were matched in 2011-12, and identified businesses not reporting correctly through undeclared income or overdue returns. He said the identified discrepancies raised more than $40 million in liabilities.
For example, by working with other agencies such as the Department of Climate Change and Energy Efficiency, the ATO was able to identify a government grant of $200,000 that was not declared by a taxpayer. Further information from the Department of Human Services highlighted the same taxpayer had also received a disability support pension, at the same time.
Controversial as they may be, the Commissioner said ATO statistics indicated that approximately 90% of small businesses in benchmarked industries fell within a benchmark ratio. However, he said around 76,000 businesses reported income that was significantly below those benchmarks.
To address this issue, Mr D’Ascenzo said the ATO wrote to around 30,000 small businesses regarding the benchmarks in 2010-11. He said around 17% (or over 5,000) of the businesses have since started reporting income commensurate with the benchmarks, thereby lowering their risk profile with the ATO.
The Commissioner said in the last financial year, the ATO’s compliance activities in the small business sector yielded around an additional $1.97 billion in taxes collected. He said that year also saw a decline in the number of returns and statements lodged on time for small businesses, as well as fewer income tax return liabilities paid on time. No doubt the general state of the economy was influential in that.
The Commissioner also said small business debt with the ATO increased in the last financial year to 61.4% of the total ATO collectable debt. The ATO believes this increase mostly reflects the cashflow impacts of the challenging economic environment. Despite the challenging economic conditions for small business, the Commissioner said the ATO will continue to support those businesses that are viable.
However, the Commissioner warned that the ATO undertook over 28,000 of what he called “firmer and legal recovery actions” in the small business sector in 2011-12. The ATO also conducted over 11,800 compliance reviews of self-managed super funds (mainly micro enterprises) raising tax liabilities of around $21.9 million.
Future technological improvements are planned to the interactions of small businesses with the ATO. By 2013, the ATO is aiming to allow small businesses to access and update their obligations online. By 2014, the ATO aims to allow small businesses to complete obligations using a mobile device and track their dealings online. Then by 2015, the ATO will aim to have integrated payment services, personalised options, and cross-channel authorisation solutions for small businesses.
With our complex and ever-changing tax laws, complying with them is not easy. That’s why around three-quarters of Australians use a tax agent. But there are ways SMEs can obtain the information they need to make tax compliance easier.
The Tax Commissioner says the ATO acknowledges that running a small business is not always easy and that behind every small business are people. He said, “We’re all human and we don’t always make the right choices, or circumstances sometimes make it extra difficult for us”. For people trying to do the right thing, he said the ATO will try to get them “over the line” where it can. A good adviser/accountant wouldn’t go astray either.
Terry Hayes is the Editor-in-Chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.
Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.
