The ATO's Annual Compliance Program for 2007-08 was released on 16 August 2007. Each year, the ATO's Compliance Program details the practices and patterns of activity that attract the ATO's attention, how the ATO plans to respond to them and how the ATO will help those trying to comply.
The key themes — with more information below
Big business faces the familiar themes of:
High net wealth individuals can expect continued scrutiny as the ATO devotes more resources to monitoring them.
Promoters face the ATO taking a "get tough" approach under the new Promoter penalty laws.
The ATO's headline issues in 2007-08 are:
For individuals the ATO will focus on:
For enterprises turning over less than $2 million the ATO will focus on:
For enterprises turning over between $2 million and $100 million, the ATO will focus on:
For enterprises which turn over more than $100 million, the ATO will focus on:
For tax professionals, the Compliance Program emphasises:
On the topical issue of tax crime, the Compliance Program raises the following issues:
The ATO's move to 'real time parameters' for monitoring taxpayers
Although the ATO has maintained its broad approach to compliance activities, it is aiming to reduce the gap between the time of a transaction and the time the Commissioner reviews that transaction. Indeed, the ATO aims to operate "in real time parameters".
In large part, this reflects the reduced time limits the Commissioner now has to amend returns to correct errors. However, there has also been a fundamental shift from reviewing past transactions to actively monitoring current activities. The Commissioner has convinced Parliament to pass laws enabling him to target people designing aggressive tax structures.
Tax risk is an issue for the board
The Commissioner's continued attempts to get Boards to consider tax risk, and his focus on private equity and merchant banks, increase the chance that complex, tax effective structuring is likely to attract the Commissioner's attention.
The ATO also aims to be more current in company tax compliance — perhaps through pre-lodgement discussions. So the ATO will always be interested in current financial year transactions and companies and their boards will need to assess those transactions for tax risk.
Focus on cross border transactions
The Commissioner's focus on cross border transactions continues to be a significant part of his compliance activities. He clearly believes they pose considerable risk to taxation revenue.
Significant transactions need independent advice
The ATO's increased focus on tax effective structuring and the possibility of pre-lodgement reviews of major transactions should sound a warning to taxpayers. More than ever, it will be worth obtaining a second opinion from independent advisors before implementing any major transaction involving tax risk.
The best time to consider the risks and to implement a transaction in a way likely to withstand ATO scrutiny is before the "deal is done".
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Melissa is a lawyer in the Maddocks Commercial team.
Melissa has been involved in acting for a range of commercial and professional industry clients.
Melissa advises extensively in the following areas:
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