The ATO has released a factsheet titled 'Tax compliance for small-to-medium enterprise and wealthy individuals'. The ATO hopes that this will improve transparency between taxpayers and the ATO.
In this publication the ATO sets out its risk differentiation framework which categorises taxpayers according to their profile.
The 4 risk categories are:
The ATO has also outlined some of the key factors it considers in determining whether a taxpayer is high-risk. These include:
- Large one-off or unusual transactions
- Significant variations between tax and economic performance
- Business performance falls outside of industry benchmarks
- Unexplained and consistent losses
- History of aggressive tax planning
- Lifestyle not supported by after-tax income
- Accessing business assets for private use
- Non-disclosure of offshore dealings, especially with low-tax jurisdictions
- Complex structures and intra-group transactions that minimise tax
A key feature of the factsheet is that it outlines the ATO's responsibilities during an audit. The ATO states that if a taxpayer is not satisfied with the interactions they have had with the ATO, they can discuss their concerns with a senior officer not involved in the audit process. Contact details will be provided at the commencement of the compliance activity.
Practitioners should familiarise themselves with this factsheet because it details the ATO's expectations for documentation and where the ATO perceives that taxpayers may not fully understand their obligations under the tax law. Practitioners can use this information to help clients take a proactive approach to minimise the compliance burden in the event of an ATO review or audit.
ATO Factsheet: Tax compliance for small-to medium enterprises and wealthy individuals
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Last updated September 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.