News & Commentary

A tax heads-up for 2010-11 07 Jun 10

Every August, the tax commissioner releases the ATO’s comprehensive compliance program for the new financial year, providing a heads-up or early warning of where tax officers will pay extra attention in the new financial year.

And every June, the commissioner or his most senior tax officers typically begin to publicly talk about what will be in the next compliance program.

In the last few days, second tax commissioner Bruce Quigley gave an insight into the next compliance program in an address to the Tax Institute of Australia’s Queensland convention.

This is valuable information for large businesses, small-medium businesses, high-wealth individuals, and everyday salary earners and investors. It can, of course, help guide effective tax-planning.

Significantly, these early warnings hopefully discourage many taxpayers from mainly focusing on tax matters near the end of a financial year. Generally, it should be a year-round exercise.

As widely expected, the tax office is stepping up its concentration on work-related expense claims as well its use of increasingly sophisticated data-matching programs to help identify undeclared income and the failure to declare capital gains on the sale of real estate and shares.

Quigley explains that the ATO compares information on tax returns against its data-matching material “for information that doesn’t add up”.

With micro businesses – those with annual turnovers of less than $2 million – the ATO will increase its attention on detecting undeclared cash income particularly in the wake of the GFC, the filing of inaccurate business activity statements, and declared incomes below the appropriate industry benchmarks.

And with small-medium businesses, the matters that the ATO will closely look at during the financial year ahead include the private use by shareholders and their associates of company-owned assets – such as holiday houses and luxury boats. Depending on the circumstances, the use of these assets may automatically be deemed as unfranked dividends of a private company.

This insight into where the ATO will strike in 2010-11 is well worth a close read and a possible discussion with your professional tax adviser. Read Bruce Quigley’s talk.

* Written by Robin Bowerman, Head of Retail at Vanguard Investments Australia.
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