The 2022/23 Budget released last week has provided additional funding to the ATO’s compliance and tax avoidance programs, enabling the ATO to amplify its audit, review and debt recovery activity.
Here are four things we should expect to see from this news, and the impact of those changes for company directors and taxpayers.
1. ATO’s Tax Avoidance Taskforce set to target new priority areas
The ATO’s Tax Avoidance Taskforce has been given increased funding of approximately $1.1 billion over the next four years. The taskforce has also been extended for a further year from 1 July 2025. This is an additional $200 million above current funding levels.
Since its introduction in 2016, the taskforce has focused on targeting and reducing fraudulent tax arrangements, tax evasion and tax avoidance carried out by corporations and via trusts, with a particular attention to multinationals, large public businesses and private businesses.
However, with increased resources, the budget papers indicate that the ATO will bolster its efforts in “new priority areas of observed business tax risks.” This indicates that the ATO will be more flexible in what it targets and will likely use business intelligence and data analytics programs to make targeting decisions.
We expect to see the ATO’s improved resourcing translate to further improvements to its data, analytics, risk and intelligence capabilities, putting a broader cross section of the multinational, large and private business community on the ATO’s risk and audit map.
2. Increased activity through the ATO’s Personal Income Tax Compliance Program
The ATO’s Personal Income Tax Compliance Program has been given an additional $80.3 million and extended a further two years from 1 July 2023. The program focuses on non-compliance of individuals who incorrectly report income and overclaim deductions.
The increase in funding should see the ATO improve its analytics capabilities to identify non-compliance even further, as well as modernise its guidance products. The additional funding will also enable the ATO to have the appropriate resources to engage earlier with taxpayers and tax agents in suitable situations, creating more compliance activities focused on individuals.
3. Continuation of the Shadow Economy Program for a further three years
The ATO’s Shadow Economy Program will continue for an additional three years from 1 July 2023.
One of the main aims for the program is to target businesses that are operating in the ‘shadow economy’ to ensure there is a level playing field for businesses who are compliant. The program targets dishonest or criminal activities that take place outside the tax and regulatory systems such as conducting cash transactions to avoid tax, illegal phoenixing and not paying staff what they’re entitled to.
The extension of the program is forecast to increase receipts by $2.1 billion and increase payments by $685.2 million. Company directors and business owners should be aware that the ATO will continue to develop its response to shadow economy activities over the next four years from 2022-23.
4. Increased funding to Tax Practitioner’s Board set to increase focus on high-risk practitioners
The Tax Practitioners Board (TPD) will receive $30.4 million of funding over the next four years from 1 July 2023.
The TPD is a national body responsible for the regulation of tax practitioners. An increase in funding should increase the board’s capacity to conduct investigations into unregistered or high-risk practitioners.
The budget papers identified that the TPD will use this funding to implement new risk tools to better identify tax practitioners engaging in poor and unlawful tax advice, aiming to improve tax compliance and raise standards in the industry.
Stay tuned for more from the Aptum leadership team, as we discuss and expand on legal issues businesses are facing.
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