ATO’s Risky Business – How to avoid being targeted
The Tax Office is building up its profiles of businesses. The outgoing Tax Commissioner tells businesses how to avoid being targeted. Report: Michael D’Ascenzo
Businesses can avoid unwanted attention from us by keeping proper records. This not only helps them with their tax obligations but also in the running of their business. If people are uncertain, we are here to provide whatever assistance we can.
Increasingly, good tax administration is “knowing the customer”. Sophisticated analytic tools and the taxpayer’s compliance history help us to differentiate our approach according to our assessment of the risk they represent.
The things we look for when developing a view as to whether a business presents a tax risk or not are:
- Does the tax performance vary substantially from business performance?
- Are there inconsistencies in activity statements or spikes in refund claims?
- Are there any large, one-off or unusual transactions?
- Are there unexplained losses?
- The lifestyle is not supported by after-tax income.
- Treating private assets as business assets.
- Accessing business assets for tax-free private use.
- Business performance falling outside business benchmarks.
By categorising a person’s or business’s tax risk relative to other taxpayers, we can determine the level of our response in a coherent and considered way.
Placing a taxpayer in a higher risk category means we apply more comprehensive verification activities according to the risk they pose and the consequences that would flow if there were non-compliance.
Our experience shows that the majority of businesses are tax compliant or, at least, try to do the right thing.
We help protect those businesses from unfair competition from the minority that abuses our tax and superannuation systems. Firmer debt action activities ensure honest businesses are not disadvantaged by the non-compliant behaviour of a few, levelling the playing field for those businesses making good and honest choices. Sometimes people get it wrong and in such situations we work with the taxpayer to get it right, and if it was an honest mistake then no penalties apply.
Source: BRW November 22-28 2012, p. 39