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The ATO Hit List for 2017

July 3rd, 2017

shutterstock_519839200There’s one naughty list that absolutely no business wants to end up on, and that’s the list of the Australian Taxation Office.

The ATO investigates specific issues with more or less weight every year. Sometimes this is due to them finding a pattern or irregularity that they think may be worth pursuing, and sometimes they simply investigate due to your Tax File Number being selected (random audits).

That said, there are some things that have been recently challenged increasingly by the ATO, who are always seeking to crack down on both common and emergent forms of tax avoidance.

The two big ones that have emerged as a focus for 2017 are a curious mix of traditional and new. On one front, you have the realisation of the scale of an old, entrenched problem within Australia’s retail sector, and on the other front an issue with the changing face of service that the internet and smartphones bring to us.

Cash payment premises

You should always seek to claim only the most accurate amount that you can on both a personal and business level when dealing with the ATO. Estimation without proof is very easy to be seen as indicative of further underlying bad behaviour, and in some cases may be a sign of fudging the books in itself.

One ever-increasing focus of the ATO recently has been cash-on-hand premises or services, which it’s been targeting since 2014 on claims of unfair competition and money-under-the-table.

In 2014, the ATO reported that close to 275,000 of these businesses were representative of a growing problem in high-risk industries, the prime example of which were cafe’s and similar establishments. These comprised roughly 16% of all referrals and tips made to the ATO for fraud or tax evasion, with the hair, nail, and beauty sector trailing somewhat behind.

Omitted income for premises mostly dealing in cash is an obvious inclusion in any ATO list, but it seems likely that the ATO had either massively undershot their projections or that fraud in the area is increasing significantly.

In 2017, the ATO instead posited that 1.6 million (a slightly larger figure than 275k) were operating with illegal cash. With emergent sectors such as internet storefronts and with tax avoiders coming up with more elusive ways to escape the taxman, we’ll be seeing an increase in focus proportional to the ATO’s uncovering of the extent of the issue.

One particular claim they had in the 2014 report was that late or delayed forms could be a sign of a business looking to suppress costs. If you’re looking to minimise the chances of having to go through an auditing process, get in quickly and with nothing to hide (and ideally don’t work in cash).

‘Sharing’ services

We live in an age where the world’s largest taxi company owns no taxis, and one of the largest hoteliers owns no hotels. Companies such as Uber and AirBNB are revolutionising old industries, outsourcing the old methods to individuals who merely use them as an extended storefront.

Uber is very easy to monitor as all costs go through the application. Likewise, all AirBNB chains go through the website, but there are numerous fraudulent or number-fudging businesses who operate under the realms of sharing or other outsourcing of traditional industries specifically for tax purposes that the ATO is beginning to crack down upon.

In particular, the ATO is looking to hit these in two separate locations:

  1. At the company side, finding out which emergent companies are seeking to do business in bad faith by intentionally obfuscating reports, making it hard for the ATO to find records on earnings by either the company themself OR individuals working for the company in invoices.
  2. On the personal side, individuals who are gaining supplementary income through these schemes, confident that they will not have to report it.

One reason to keep an eye on this is the complicated nature of the laws surrounding it. In January, Uber attempted to have its status as a ride-share company used as a justification to remove GST for its drivers. While the motion eventually failed, it’s a great example of how startups are influencing the legislature that was created to support traditional industries.

In fact, although operating here for years, January marked the first official ruling that the ‘paid ride-sharing’ was, in fact, a taxi service. Hardly a surprise from anybody who’d used the application, but still an important distinction.

Overall, anybody operating in or for such an organisation should do two things: firstly, they should scrutinise the legality of their employer (or ‘employer’, in the case of some), and how transparent they expect you to be with your earnings. If they don’t, it might be a sign that they have something to hide themselves.

Secondly, you should cover your tracks by being even more vigilant than others about itemising every single thing that you do, and not claiming extras that are hypothetically possible but toeing the line.

Work-related expenses

In recent years it has been found by the ATO that more than $22 billion of work-related expenses are being claimed, and so this year they are prepared to do a ‘blitz’ in order to identify areas of non-compliance by taxpayers taking advantage of the system.

Letters have already been released to taxpayers that have been identified by the ATO as claiming more work-related expenses on average than those in similar positions around Australia, and they’ve also added a new feature to MyTax (the ATO’s online lodging system) that will flag the user of excessive claims before submission is completed.

Rental properties

According to Mark Chapman of H&R Block, around 2 million Australians are investment property owners. The ATO is thought to be targeting those property owners who are claiming incorrect deductions in the following areas:

  • Spouses who are inappropriately splitting rental income and deductions for properties that are jointly owned.
  • Rental property deduction claims that are made prior to the property actually being available to rent, and before it is occupied.
  • Holiday homes that have had excessive deductions claimed against them.
  • Deductions being claimed for the private proportion of loan interest.
  • As of 1st July 2017, it will also be disallowed by law to claim for visits to rental properties. However any visits that were taken prior to 1st July 2017 will still be permitted.

Don’t get caught out

If you’re worried that your business may be targeted by the Australian Tax Office, it’s best to seek financial advice before anything happens. Contact the expert business financial advisers here at Australian Debt Solvers today.

If Your Business Finances Are Our Of Control, We Can Help.
Call us on 1300 905 107 or Click Here For More Information.

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David Hill
David has over 15 years in the insolvency industry – advising clients through restructuring of their business. His clear, “straight up” style provides clients with a strong direction of what they need to do, and how the process will work. As importantly, he brings empathy to the process – which is essential at a “high-stress” time for clients.

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