*This article was originally published here
An internal tax office briefing document, released to the ABC under freedom of information laws, warns people will commit fraud by taking illegitimate advantage of the Government's instant asset write-off for small business.
The ability to instantly deduct the cost of assets worth up to $20,000 was central to the Government's suite of small business measures announced in the May budget.
As the tax office begins to deal with what it anticipates will be a large volume of tax-return claims made under the policy, the ABC can reveal its bureaucrats have expressed concern about the measure's vulnerability to fraud.
In a document titled Response form to new policy alert, marked "for official use only", staff from the ATO's risk department state the extra claims will make it more difficult to detect high-risk refunds.
It also states "fraudsters will take advantage of this more complicated environment ... to commit fraud by trying to look like legitimate businesses taking advantage of this initiative".
Asked the day after the budget if the Government would cap claims if they exceeded the budgeted $1.8 billion, Treasurer Joe Hockey said it would not.
"We want people to spend, we want people to go out and have a go. We want them to have a go," he said.
At a press conference to sell the scheme two days after it was announced, Prime Minister Tony Abbott said he believed the ATO could effectively police it.
"This will be administered by the tax office, and the tax office are well practiced at ensuring people are only doing what's legitimate under the rules," he said.
"I'm very confident that this will be administered fairly, justly, effectively to the benefit of all the people of Australia."
The tax office documents released to the ABC show this internal debate took place after the policy was announced, but in a statement, a spokeswoman for Small Business Minister Bruce Billson said the office was consulted prior.
"Cabinet was provided with Treasury advice throughout the development of the small business package in Budget 2015," she said.
"As part of that advice, the ATO's views on administrative matters were sought on a number of measures."
The statement does not respond to questions about the adequacy of resourcing, stating that "this is a matter for the ATO".
ATO says it expects no additional fraud
In a separate response, the ATO told the ABC that contrary to the concerns expressed by its staff in the policy response document and other emails, it is not concerned about fraud.
"The ATO anticipates that there will be no additional fraud resulting from this policy," an ATO spokesman said, also defending the ATO's ability to monitor potentially fraudulent claims.
"The ATO is always on high alert for fraudulent activities. We deploy a range of sophisticated techniques to identify and stop fraud, including monitoring of activity statements for sham or false claims
"The ATO is resourced to conduct a risk-based program to identify taxpayers that are not meeting their obligations and uses a range of approaches to influence taxpayer behaviour; from providing information to overcome common mistakes to undertaking audits and investigations when warranted."
Certified Practicing Accountants Australia chief executive officer Alex Malley said the timing of the policy's announcement and introduction would have created difficulties for the tax office.
"This policy announcement was made on budget night and became live that night, which is unusual," he said.
"I think certainly would have meant that the tax department had to do some pretty quick homework to work out how to administer it."
- Expect an increase in capital acquisitions post May 12, 2015 leading to increased refund claims.
- It is likely some taxpayers who do not normally receive GST refunds will receive them, such as tradesmen.
- These extra refunds may make it more difficult to detect high risk refunds as a result of greater numbers of genuine businesses claiming capital acquisitions.
- Fraudsters will take advantage of this more complicated operating environment to commit fraud by trying to look like legitimate businesses taking advantage of this initiative.
- Additional resources may be required to minimise the threat of fraud and, to a lesser extent, ensure genuine business claims are legitimate.