Speaking to Accountants Daily, RMS senior manager Tracey Dunn said recent Tax Office activity and the introduction of new regulatory measures point towards a spike in enforcement activity over the next few months.
Earlier this year, the government announced a fresh $1 billion funding boost to the ATO to extend the operation of the Tax Avoidance Taskforce and to expand the Taskforce’s programs and market coverage.
Last week, ATO deputy commissioner Deborah Jenkins announced that the Tax Office will launch a new black economy hotline on 1 July 2019, giving the public an opportunity to dob in businesses “offer[ing] discounts for cash”.
ATO commissioner Chris Jordan has also hinted towards a $10 billion tax gap in the small business sector, significantly larger than the corporate tax gap at $1.8 billion, and the individuals not in business tax gap at $8.7 billion.
On the individuals front, the Tax Office also recently applied to the Office of the Australian Information Commissioner (OAIC) to hold on to lifestyle assets data from insurers for a further two years.
“There has been a marked increase in job advertisements for various positions within the ATO, particularly within the black economy and Tax Avoidance Taskforce areas,” Ms Dunn said.
“The government committed over $1 billion of funding in the federal budget for ATO audit activity, and I fully expect we will start to see a marked increase in ‘please explain’ letters and audit activity over the coming months.”
With Single Touch Payroll data starting to flow through, Ms Dunn believes small businesses and individual taxpayers can start expecting reviews if their data falls outside benchmarks.
With this in mind, Ms Dunn believes tax practitioners should start proactively engaging with high-risk clients to manage their firm’s own risks.
“Tax agents have the opportunity to assist clients with relevant tax advice or with setting up processes to help them comply with tax obligations,” Ms Dunn said.
“Tax agents also have the opportunity to review their own risk, by ensuring adequate processes are in place to assist in identifying things such as unusual deductions, clients who disclose low taxable income but have a lavish lifestyle, client non-compliance with compulsory superannuation and withholding obligations, Division 7A and trust issues.
“If the tax agent is aware of, or identifies, areas of client non-compliance, I would strongly recommend they discuss with their clients the benefits of early engagement and voluntary disclosure with the ATO.”