Acknowledging that the ATO is in a “position of disadvantage” due to the fact that “some people” don’t like paying taxes, the commissioner of taxation, Chris Jordan told an audience of accountants in Queensland that the tax office would nevertheless be policing non-compliance.
“From the random audits and other compliance activities conducted for the individual market, we are concerned by the level of non-compliance we are seeing – particularly in relation to overclaiming of work-related expenses,” he said.
“We also see some agents neglecting to check that their client has actually spent the money on the required item and that it was directly related to earning their income; and some claiming for personal (not work-related) expenses through carelessness, miscalculations and mistakes.”
He highlighted undeclared income, unexplained wealth or lifestyle for both individuals and small businesses, and incorrectly claimed private expenses as areas of concern.
Additionally, the ATO is zeroing in on unpaid superannuation guarantees and the concentrations of cash-only businesses and those with low usage of merchant banking facilities.
Speaking on individual tax non-compliance, he said: “Where record keeping requirements have been simplified (for example $150 for clothing and laundry expenses and cents per kilometre method for car expenses), we are seeing some agents accepting these as ‘standard’ claims, with the assumption that ‘no explanation’ is required.
“While these can be small amounts in each case, when you add them all up, you end up with a large figure – an aggregate larger than the large market tax gap of $2.5 billion.”
Calling this an “exciting time to be in tax”, Mr Jordan said the Paradise Papers leak, the ongoing Senate Inquiry into Corporate Tax Avoidance and the Black Economy Taskforce have encouraged great interest in tax affairs.
He said: “I cannot recall a time ever before when the worldwide community was so interested in people’s tax affairs; and by direct association – the performance and actions of governments and tax authorities, and the role of tax advisers and accountants.
“Our competence, transparency, ethics and integrity, and our capacity and speed to respond, are all under the spotlight. And while that is a challenge, it is also a huge opportunity to show what we stand for.”
Continuing, he said that despite the Australian community’s general reluctance to engage with the ATO, the tax office was focused on “fostering willing participation”, via an improved client experience, simplifying the taxation process and “giving people confidence that we target and take the necessary action with those who are not doing the right thing”.
He said this approach was designed to focus on the 95 per cent who do the right thing, rather than penalising them for the non-compliant actions of the few.
“I want the ATO to be comparable with the best of any large organisation anywhere in the world with a large and diverse client base, where people who interact with us, although they probably didn’t want to, think their dealings were about as good as they could ever expect from a modern revenue authority,” he concluded.