ATO releases official list of its crackdown targets – are they coming after you?

The Australian Taxation Office has unveiled its official 2009-10 compliance program, with the wealthy, executives at private companies and employers who try to dodge their tax and superannuation contributions at the top of the list.

The 48-page document, which is now available on the ATO’s website, outlines the taxman’s big areas of concerns.

Commissioner Michael D’Ascenzo says that while the ATO will work hard to help businesses and individuals struggling in the current downturn, tough times mean more taxpayers will be tempted to push the boundaries.

“When many in the business community are doing it tough, it is even more important that the system is seen as fair and equitable.”

“Our work to make sure people meet their obligations ensures there is no unfair advantage for those who don’t.”

So what are the taxman’s big targets? Let’s take a look at the key areas:

Micro businesses (under $2 million in turnover) – obligations offensive

• The ATO will be looking closely to ensure small businesses are meeting their employee obligations around withholdings tax and particularly super contributions. The ATO says businesses “are not getting it right” and claims that of more than 4,300 high risk employers selected since July 2008, over 3,350 had not complied with their PAYG withholding obligations and over 2,000 had not met their superannuation guarantee obligations.
• Sales of property, shares and investments will be closely monitored.
• Micro businesses that run a self-managed super fund will again be closely scrutinised, with attention given to record keeping requirements and attempts to access super funds earlier than is allowed.

Small to medium businesses ($2-250 million in turnover) – private companies in the gun

• As with micro businesses, the ATO will watch employer obligations around employee tax and super contributions closely.
• The ATO is cracking down on business owners who use loans, payments and debt forgiveness to distribute private company profits to shareholders or their associates without paying the correct amount of tax.
• Companies trying to dodge capital gains tax obligations can expect to be heavily scrutinised.
• Tax planning around business exists is another area the taxman plans to crackdown. SMEs need to be careful about structuring exit and succession-planning arrangements if the primary objective is to receive a tax advantage.
• Phoenix arrangements – whereby a business owner closes one business to avoid creditors and then opens up another, similar business – are another target.

Individuals – executives and sales people in the spotlight

• Executives and directors, particularly of private companies, are one of the big ATO targets again this year. The taxman is specifically looking to make sure shares and options received as remuneration are correctly reported and will also be examining income?splitting arrangements and international transactions.
• There are four specific occupations under the spotlight this year: truck drivers, sales and marketing managers, sales representatives and electricians.
• Specific claim areas in the spotlight include: Motor vehicle and travel expenses; the living-away-from-home allowance; home offices, mobile phone and internet expenses.
• If you’ve had high tax liabilities in the past, expect the ATO to keep you under close watch.
• The ATO will also give priority to what it calls “high-profile professions that influence the wider community”, particularly the legal profession and sportspeople.
• If you’ve sold a major asset and are expected to have a capital gains tax obligation, you can expect extra scrutiny.

The wealthy – if you’re worth more than $5 million, watch out

• The ATO has lowered it sights in its targeting of the wealthy. Previously, those with more than $30 million were targetted, but now anyone with over $5 million in net worth is in the firing line.
• One particular area of focus is wealthy property developers. If the tax reported from a property development is “inconsistent with financial conditions” then watch out.
• The improper use of tax losses will also be a focus given the economic environment.