Following the release of its income tax gap report, the ATO has this morning published its superannuation tax gap findings. The superannuation tax gap is the difference between total tax collected for super funds and the amount that would have been collected if all due taxes were paid.
For the 2014–15 income year, the ATO estimates a net income tax gap for small super funds to be $39.9 million. The tax payable from small super funds in that year was $1.2 billion, and the gap represents about 3.2 per cent of theoretical liability.
The ATO reached its tax gap figure for small funds through a random enquiry program, which also showed that misunderstandings about the application of ECPI, incorrect reporting of franking credits and over-claimed deductions were key aspects of non-compliance for SMSFs.
For the 2015–16 financial year, the net large super income tax gap is estimated to be $127 million, translating to 1.5 per cent of theoretical tax liability. The total tax payable by large super funds for the 2015–16 income year was $8.2 billion.
Typically, large funds trip up on their compliance obligations where they’ve had “differences in law interpretation” compared with the ATO. This includes the Foreign Income Tax Offset, CGT discounts and over-claiming of franking credits.
Ramping up its focus on third-party data, which is often produced by outsourced companies for large super funds, is central to the ATO’s plans for targeting non-compliance with tax obligations for large super funds.
“As outsourcing is a significant feature of the industry, the quality and integrity of third-party data is essential for accurate reporting by the funds. This can lead to third-party reporting errors and, therefore, unpaid tax,” the ATO said.
“We recognise the quality and integrity of third-party data is key to accurate reporting by funds, and are broadening our existing focus on fund governance to ensure appropriate checks and controls are in place to provide added levels of assurance around third-party data,” the ATO said.
Accountants Daily notes limitations in the ATO’s data. The reliability of its methods were assessed as medium for large superannuation funds, and the ATO said there is a wide confidence interval for small superannuation funds’ estimates.
Further, there are limitations to drawing conclusive comparisons between the two segments, including that the ATO does not have published tax gap data for both small and large superannuation funds from the same income year.