The Commissioner of Taxation has recently released his 2017/2018 Compliance Programme.

As with every compliance programme, the emphasis shifts and as with previous years, the ATO’s goals are about “being fair and professional; applying the rule of law; supporting taxpayers who want to do the right thing; and being consulted, collaborative and willing to co-design.”

The ATO continues to review the tax implications imposed by an increase in both domestic and international dealings and widening its focus on an expanding body of individual and high-wealth taxpayers both on an asset and income basis.

Hot off the press, the Tax Office is also continuing conducting a data matching program in respect of credit and debit card (including overseas) details, which identifies merchant transactions conducted in various income years, more particularly in 2015/2016 and 2017/2018 financial years. This no doubt will include tax information requests from Greece’s Tax Authority and other overseas revenue authorities.

In addition, taxpayers should be mindful that the tax office also has the ability to restrain a taxpayer from travelling overseas should a taxpayer have any outstanding tax liabilities in Australia, in particular for those taxpayers who intend on travelling permanently back to their home country.

Noting the issues raised above, ATO has obtained data from banks that identify credit and debit card transactions (both within Australia and overseas) made by Australian businesses and individual taxpayers. This data is matched against taxpayer records to identify those people deliberately under-reporting or omitting income.

The tax office has the ability and has requested data from the following institutions.

  • Commonwealth Bank of Australia;
  • St George Bank;
  •  American Express Australia Limited;
  •  Diners Club Australia;
  •  Westpac Banking Corporation;
  •  Australia and New Zealand Banking Group Limited;
  • National Australia Bank Limited;
  • Bendigo and Adelaide Bank Limited;
  • Bank of Queensland Limited; and
  • BWA Merchant Services Pty Ltd.

The ATO will rely more upon information technology to ensure that enforcement is far more effective. Data matching and information sharing enables them to focus more on high risk individuals, firms, companies and institutions. They are also expanding their network of collaborative arrangements including everyone from governments through to financial institutions. The capacity to identify tax risks is significantly improving. Deterrence through sanctions and the real possibility of being caught are high on the ATO’s agenda.

Moving forward for the income years 2018/2019, as part of the ATO review processes and its risk compliance programme, both for individual and business taxpayers, the ATO will continue to conduct such reviews and it’s a timely reminder that if Australian/Greek residents residing in Australia have not disclosed all of their income and / or have not disclosed their assets overseas whilst residence has been taken up for Australian tax purposes, they should make a voluntary disclosure of their circumstances directly to the ATO. Failure to disclose can result in very heavy penalties and may attract imprisonment. Having said that, the ATO Compliance Programme for 2017/2018 identifies the following major targets:

  1.  Taxpayers taking up residence in Australia from overseas but not disclosing their income from overseas and assets;
  2.  Overseas taxpayers residing in Australia using overseas debit and credit cards;
  3.  Overseas taxpayers failing to disclose interests in overseas companies (this is clear concern to the ATO);
  4.  Transfer Pricing – a clear target by the ATO on international profit shifting by using complex arrangements;
  5.  CGT – Unreported capital gains and income. The main residents’ exemption will continue to be scrutinised;
  6. Reviews and audits will be conducted to identify unreported capital gains made on the disposal of shares, investment properties, vacant land, and holiday houses;
  7. Superannuation fund contributions will be cross-matched “to individual tax returns to identify unreported capital gains or unreported income”;
  8. Top executives of large companies with total remuneration of $1M or more are of interest with options and rights issues, cash bonuses and non-income capital benefits receiving attention;
  9.  Lodgment of including high income executives and professionals. The ATO’s focus will also include child support obligations, promoters of tax exploitation schemes and those using tax havens;
  10. GST – The ATO has always had issues with the cash economy, however a special taskforce has been formed to tackle these issues. This year, the ATO will contact a substantial amount of businesses in response to tip-offs and enquiries;
  11. Taxpayers whose lifestyles are out of step with their reported income;
  12. Unreported business-to-consumer cash transactions (tradespeople, subcontractors and the building and construction industry and restaurants and café proprietors are high on the list);
  13. GST – real property transactions including unreported sales and the margin scheme. The ATO is particularly concerned that the GST system is being rorted by the alleged export of services where natural consumption occurs in Australia, yet the overseas entities providing those services are not registered for and do not pay GST;
  14. Payments to shareholders, shareholders’ loans and the forgiveness of debts to shareholders;
  15. High wealth individuals who have substantial assets and income. The ATO is concerned with identifying these individuals, examining the entities through which they conduct business and checking the type and style of transactions involved;
  16. Large businesses – “We will examine the use of tax havens, cross border arbitrage, transfer pricing and profit shifting, as well as corporate restructuring that shifts assets, functions and risks offshore”;
  17. Once again promoters, professionals and participants are the main game. The ATO sees promoters as a major threat to the revenue as with any tax exploitation scheme.

 

Taxpayers using credit or debit cards issued overseas, should be aware that ATO is set on matching data to locate undeclared assets or income. Photo: Pixabay

What’s more of a concern is that the ATO’s primary role is the maintenance of a cost-effective tax administration system which safeguards the revenue. As a result, both tax crime/fraud/money laundering and aggressive tax planning via overseas debit and credit cards come in for special attention annually.

Both information technology and enhanced co-operation both in Australia and overseas between governments and agencies is being steadfastly pursued. The ATO are working in with the Federal Australian Police, Australian Crime Commission, Interpol and Austrac in order to achieve these results.

Because of the issues raised above, taxpayers need to be vigilant and aware that the use of any complex arrangements and contrived corporate structures to avoid paying their fair share of tax will not be able to hide behind the veil of secrecy.

In addition, the ATO is boosting its International Tax Information Sharing treaty powers to obtain information from other revenue authorities including but not limited to the Australian Investment and Securities Commission; Centrelink; the Foreign Investment Review Board; the Australian Prudential Regulation Authority; Overseas Tax Authorities that have agreements with Australia – including Greece via its OECD Multilateral Tax Assistance Agreement.

If a taxpayer falls within one of those categories above, they should immediately contact a qualified financial adviser or go to the ATO directly and explain its individual circumstances. Failure to do that, and once an audit is commenced on the taxpayer’s tax affairs and the ATO find any discrepancies with the taxpayer’s income or its international dealings, the penalties and the interest are very high, which could also lead to criminal prosecution and a term of imprisonment.

In these circumstances, before taxpayers lodge their tax returns for the income year ending 30 June 2018, or if taxpayers have already lodged their tax returns, they should take another review of their tax affairs to make sure that they have disclosed all of their income, both in Australia and overseas.

*Tony Anamourlis is an International tax lawyer and academic. This is general information only, You should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances.