The tax commissioner has flagged an impending crackdown on tax gaps among SMEs, following the success of its campaign against tax loopholes and avoidance by multinational corporations.
The ATO has attracted plenty of interest in its campaign against an array of tax avoidance measures by large corporations, which have netted billions in otherwise lost revenue – including the $340 million tax bill owed by mining giant Chevron.
Yet the commissioner of taxation has said that SMEs are not going to be immune from scrutiny, and has issued a warning to business owners and individuals that flouting the rules will not be tolerated – and nor will pressuring accountants to put through claims they know to be illegitimate or suspect.
“With the small businesses market, we are seeing … some careless preparation and opportunistic claiming,” commissioner Chris Jordan told the Institute of Public Accountants last week.
“We are yet to release the Individual market and Small Business tax gap estimates, but given the work to date and the preliminary work of the Black Economy Taskforce, I can tell you we are focused on, and are targeting:
- Undeclared income
- Unexplained wealth or lifestyle for individuals and small businesses
- Private expenses incorrectly claimed
- Unpaid superannuation guarantee
- Concentrations of cash only businesses or those with low usage of merchant banking facilities.”
According to Mr Jordan, one of the ATO’s primary targets is on annual deductions for individuals, amid concerns Australians are depriving the national economy of large sums of cash by overstating their work-related expenses.
“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 over-claiming of work-related expenses,” said Mr Jordan.
And, he said, it is not just taxpayers themselves that are flouting the rules, with accountants and tax agents being less than diligent in enforcing the rules.
“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,” Mr Jordan noted.
“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.”