The ATO cracks down on wealthy individuals

The Australian Taxation Office is cracking down on wealthy individuals with letters sent requesting information regarding details about private companies and investments.

The letters are part of the ATO’s emphasis on its data-matching and access powers to stop tax evasion. A department spokesperson says businesses will also be targeted as part of its wide-reaching compliance program, but that no particular type of business will be given priority over others.

“The report on our activity was out in August and has been up on our website since then,” the spokesperson says.

“We’re not targeting any particular type of business; our focus is broad and extends right across the board,” the spokesperson says, but adds that “the ATO has refocused audits to target smaller and mid-size businesses in compliance activities that have become much more comprehensive”.

“Wealthy individuals recently received 11-page ‘please explain’ questionnaires from the ATO with detailed questions about family trusts, private companies and off-shore investments. The letters asked recipients to provide information such as family holdings in unlisted companies, details about private trusts and business partnerships.”

The ATO’s latest Compliance Program report shows the authority conducted 409 audits, 706 reviews and 1,668 phone and letter checks of SME incomes in the 2008-09 financial year.

It also conducted 6,700 reviews and audits of micro-enterprise incomes and completed 36 compliance audits and 260 risk reviews of larger businesses. This is broadly in line with the size of each market segment, the ATO says.

HLB Mann Judd tax partner Peter Bembrick agrees the number of letters sent by the ATO is increasing across the board, but says business owners need not be concerned by receiving a letter asking for activity information.

“It doesn’t need to raise any particular worry, these letters are just a general information gathering exercise by the ATO, there isn’t any particular reason why they’re [sending the letter to] this particular person,” he says.

Bembrick advises recipients to participate fully and make sure they send in all information asked for. “The ATO talks about it being voluntary but realistically you can’t ignore something like this.”

He says recipients should keep in contact with the ATO and ask for more time to complete the request if necessary.

“There’s a lot of information to provide but the ATO understands it may take awhile. They’re pretty reasonable if you call them up early on and ask for more time. Just tell them how long you need.”

It’s also important to disclose any circumstances that could look suspicious as early as possible, to avoid the hassle of a full-blown investigation, he says.