The taxman's targets
By Annette Sampson | theage.com.au | 29 August
The strategy To stay under the Tax Office's radar this year.
How do I do that? The Tax Office has just released its 2008-09 compliance program - effectively a road map for taxpayers wanting to avoid potential problem areas. Because it can't audit every single return, the regulator focuses on what it sees as high-risk areas, which means if you fall into one of these categories, you should take extra care.
So what's the focus this year? A lot of the old favourites have cropped up again. Two of the biggest areas of claims made by individuals are work-related and rental property expenses, and they'll both be getting extra attention again. With work-related expenses, the Tax Office says it will pay particular attention to occupations with a pattern of large and/or rising claims, returns that don't fit the pattern for a particular occupation and claims in returns lodged by tax agents that are outside the norm for their client base. It's also looking more closely at claims from nurses, medical practitioners and chefs.
With rental property expenses, the Tax Office says under-reporting income and overclaiming expenses is an ongoing problem. This year it will focus on landlords who incorrectly claim deductions for interest or those whose claims for capital works exceed the construction expenditure. It will also be looking for tax returns where initial repair or renovation costs are incorrectly claimed as repairs and maintenance, non-deductible claims for body corporate fees to cover the cost of capital improvements or capital repairs, borrowing expenses where claims are incorrectly claimed for stamp duty on the purchase of the property and incorrect return schedules.
A new area of focus this year is super contributions. The Tax Office says it will be looking to find taxpayers who have overclaimed deductions for their super contributions (or claimed deductions they are not entitled to) or who have made excess contributions.
How will it do that? Super funds must report all member contributions to the Tax Office. It says it will match this information against returns to check that claims match what the fund received and that the contribution caps have not been exceeded. If they have, it will levy an excess contributions tax. If you've exceeded the non-concessional cap (for non tax-deductible contributions), you'll also be sent a compulsory release authority to withdraw the tax amount from the fund.
What other claims are under scrutiny? Executives and directors first appeared on the list last year and have cropped up again. The Tax Office says it will write to public company executives who appear to have under-reported income, with a focus on shares and options received as part of their remuneration. It's also expanding its sights to senior executives of private and foreign-owned companies. Failure to report equity benefits and cash or profit share bonuses is a key area of interest. It says it is also checking the returns of individuals involved in takeovers to ensure income and capital gains are correctly reported.
Asset sales are also a focus for the broader population. The Tax Office says capital gains tax compliance seems to be improving but it's still expanding its data matching to identify asset sales which may not have been properly accounted for. This year it will match information on asset transactions from state and territory title and revenue offices, securities exchanges and share registries, and reports from managed funds.
It says its reviews of at-risk cases (taxpayers who have been identified as being more likely to have errors in their returns) will include people who made a gain from disposing of assets to invest in super.
There is, of course, an ongoing focus on tax minimisation schemes - both legal and dodgy, tax havens and schemes such as those offering early access to super. If you own a business, be warned the Tax Office will be stepping up its use of data matching to target people who may have under-reported income or overclaimed expenses and will conduct more than 5000 cash economy audits or reviews.
It is also looking at partnership and trust distributions to ensure they are properly declared.
First published by TheAge.com.au on August 29 2008
Visit theage.com.au for the latest news updated throughout the day
