Date posted: 8/05/2018 5 min read

Tax agents on notice about personal tax returns

ATO to get more money for individual tax compliance activities

In brief

  • ATO has identified “significant compliance issues”
  • Individuals and their tax agents to be targeted
  • ATO Tax Gap report on individuals expected soon

Accountants preparing personal tax returns need to review their compliance and risk procedures

The Australian Taxation Office (ATO) will be funded to the tune of $131 million over four years from 1 July 2018 to ‘increase compliance activities targeting individual taxpayers and their tax agents’. 

The Government says the ATO has identified a number of significant compliance issues for individual taxpayers, resulting in a significant loss of revenue each year. 

This sounds like code for over-claimed work-related deductions, a topic of concern raised by Commissioner Chris Jordan in recent speeches. 

The funds will also be used ‘to detect incorrect reporting of income, such as foreign source income of high wealth individuals’. 

Expect new compliance activities, including additional audits and prosecutions. There will also be an increase in ATO education and guidance materials, and unspecified types of new pre filling on income tax returns. 

So-called ‘nudge’ techniques will be used, providing more real-time messaging to tax agents and individual taxpayers to deter over claiming of entitlements.

CAs in the business of preparing individual tax returns should review existing risk management procedures, and consider whether clients should be challenged a bit more to verify larger claims, for example by requesting to see substantiating records for large deduction claims.

The Commissioner has flagged the release of the ATO’s Tax Gap Report for individual taxpayers. It is expected that this will be a big number, perhaps larger than the tax gap for other taxpayer segments (including large companies).The Government’s pre-emptive funding for more ATO compliance activity suggests the Tax Gap Report will be published soon, however no date has been specified yet.

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