Compliance with tax laws is a major issue for all SMEs and that includes GST.
Monthly Business Activity Statements (BASs) etc are a drain on already stretched SMEs but they must be done.
While complying with the GST laws may be relatively straightforward for some businesses that may not be the case for others and the Tax Office is ramping up its efforts to detect and act on GST non-compliance.
In the 2010-11 Federal Budget in May last year the ATO was promised specific funding to look closely at GST compliance. The Government pledged to provide $337.5 million to the Tax Office over four years (the 2010-11 to 2013-14 income years) to fund additional activities designed to promote voluntary GST compliance. The Government hoped the move would provide a more level playing field for Australian businesses.
The ATO says it will implement a dedicated program over the next four years to deal with some specific GST compliance issues. It will focus on:
- Timely lodgement of activity statements, eg monthly, quarterly, etc.
- Verifying GST refund claims. Among other things the ATO will increase efforts to detect those using false, manipulated or stolen (or assumed false or stolen) identities to obtain GST refunds.
- Identifying and dealing with the deliberate avoidance of GST.
- Addressing ageing GST debts and those who deliberately use debt as a way of avoiding tax obligations.
Target areas
The ATO says it continues to expand its ability to identify non-lodgers and detect businesses that over-claim entitlements, deliberately under-report or omit income and use cash transactions to hide income. The ATO will do this in a number of ways:
- Reminders: It will use a mix of pre-due date SMS and letter reminders around lodgment – SMEs should not be surprised to get an SMS from the Tax Office.
- Overdue statements: The ATO will contact taxpayers who have one or two activity statements overdue.
- Multiple obligations: The ATO will increase its focus on taxpayers who have multiple activity statement obligations outstanding.
- GST refunds: These are a major concern of the ATO and it plans to verify refunds by phoning or visiting businesses and contacting third parties to substantiate claims or check for omitted or incorrectly reported property sales and purchases. SMEs should be aware of this.
- Data-matching: This is hardly new but the ATO does keep reminding businesses how it uses this compliance tool. The ATO will match sales and high value transactions to activity statements and using information on asset transactions (eg in the property industry) from state revenue offices, land titles offices and share registries. The ATO will look closely at the property industry to identify developers who sell property but do not lodge activity statements.
- Outstanding GST debts: Another problem area. The ATO says it will take “firm action” with those businesses that don’t meet agreed debt repayment arrangements. That might include making an assessment of the net amounts the ATO thinks are owing, imposing penalties or even prosecuting businesses for not lodging. If a business has previously defaulted on a payment arrangement the ATO may impose more stringent requirements before agreeing to a new arrangement, eg it might ask for an up-front payment or request that payments are made by direct debit. SMEs shouldn’t take this issue lightly because in 2009-10 the ATO said 1133 individuals or entities (companies, company directors, trustees and partners) were successfully prosecuted for breaches of the law for activity statements, mainly for non-lodgement and failure to provide information offences.
- Identity crime. This is also a major ATO focus because it often facilitates GST fraud. The ATO will increase efforts to detect those using false, manipulated or stolen (or assumed false or stolen) identities to obtain GST refunds. It will (i) check and verify GST registrations, including where people try to avoid registering or register using a false or stolen identity; (ii) contact taxpayers registering for GST to confirm their identity; (iii) continue to validate suspect returns and conducting pre- and post-issue audits of “high risk groups”.
GST compliance can be quite “simply” (a term used with some trepidation!) a regular mechanical exercise for many businesses, but that doesn’t mean it should be taken for granted.
The GST and related issues the ATO is focussing on are clear, so SMEs should heed the message and make sure their GST houses are in order.
Terry Hayes is the senior tax writer at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions . 
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