GST Compliance

ATO Targeting GST Compliance

The ATO received specific funding in the 2010 Budget to look closely at GST compliance, and will be implementing a dedicated program over the next four years to deal with some specific compliance issues.

They will focus on:

  • The timely lodgment of activity statements;
  • Verifying GST refund claims;
  • Identifying and dealing with those that deliberately avoid GST; and
  • Addressing aging GST debts and those who deliberately use debt as a way of avoiding their tax obligations.

They are continuing to expand their ability to identify non- lodgers and detect businesses that overclaim entitlements, deliberately under-report or omit income and use cash transactions to hide income. They will do this by:

  • Using a mix of pre due date SMS and letter reminders around lodgement time;
  • Contacting taxpayers that have one or two activity statements overdue;
  • Increasing their focus on taxpayers that have multiple activity statement obligations outstanding—this includes telephony based lodgment enforcement, default assessment and in some cases, prosecution action;
  • Matching sales and high value transactions to activity statements and using information on asset transactions (for example in the property industry) from state revenue offices, land titles offices and share registries;
  • Verifying refunds by phoning or visiting businesses and contacting third parties to substantiate claims;
  • Taking firm action with those businesses that don’t work with the A TO or meet agreed debt arrangements;
  • Comparing businesses to small business benchmarks for their industry to select businesses for audit— businesses that do not report within their range may not be recording or paying tax on all their transactions, especially cash transactions;
  • Using benchmarks to calculate default assessments where a business provides insufficient or unreliable information or has not met their lodgment requirements; and
  • Using new risk filters and risk models to detect incorrect or fraudulent refund claims on activity statement credits.

For those “choosing to disregard the law and work outside the tax system”, the ATO warns there will be serious consequences including interest, penalties and potential prosecution.

They state that the result of their efforts will be better controls to protect the GST system and an increased capability to detect GST fraud.

In 2009/10, 1,133 individuals or entities (companies, company directors, trustees and partners) were successfully prosecuted for a total of 1,827 breaches of the law for activity statements, mainly for non-lodgment and failure to provide information offences.

Verifying GST refund claims and GST evasion

The ATO will also audit, and where appropriate prosecute or refer to the Director of Public Prosecutions (DPP), taxpayers who:

  • Deliberately do not register for GST when they need to;
  • Intentionally do not report, or consistently under-report their tax obligations;
  • Collude with others to evade or avoid tax obligations;
  • Intentionally do not pay their tax obligations;
  • Try to obtain a refund to which they are not entitled; or
  • Persistently and repeatedly exploit bankruptcy.

Proposed GST Reforms

The Assistant Treasurer has released a number of pieces of draft legislation to make further reforms to the GST rules as part of the Government’s efforts to “simplify and streamline Australia’s tax system”, including: • Allowing taxpayers to self

assess indirect taxes such as the GST and wine equalisation tax (WET)

More principle-based and simple GST grouping rules that also allow GST grouping of non-operating holding entities.

The above two measures are to apply from 1 July 2011.

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