5 ATO Audits Businesses Must Know26 April 2023
How To Be Prepared For A Business Tax Audit2 May 2023
The Australian government is taking action to reduce tax avoidance across federal, state and territorial levels. According to the Australian Tax Office (ATO), around a third of large corporations failed to pay tax for the 2020-2021 financial year. Despite this, the ATO insists that most entities are compliant and it is taking strong action against those who do not comply.
Some businesses believe that the ATO is not doing enough to ensure large companies pay their fair share of tax. However, the ATO has revealed that large corporations have the smallest tax gap of 4.2%, whereas medium-sized businesses have a 7% difference and small businesses have the largest difference of 11.2%.
Tax gap refers to the difference between the actual amount of tax collected by the ATO and the estimated amount that should be collected if everyone complied with tax laws.
The ATO Is Looking Closely at SMEs
To curb tax avoidance, the government is implementing TA 2023/1, which addresses the use of interposed holding companies to evade taxes. The ATO warns that it will scrutinise these arrangements more closely, and both taxpayers and tax agents promoting such schemes may face serious penalties.
The Victorian Building Authority (VBA) is also taking action against building companies that shut down to avoid paying debts. The ATO-led Phoenix Taskforce is identifying and investigating businesses suspected of engaging in illegal phoenix activity. Phoenixing involves winding up or abandoning companies to avoid paying debts, then setting up a new company to carry on the same business without the debt obligation.
Controversy surrounds the delays in overhauling the Australian Securities and Investments Commission’s (ASIC) business registries. The Modernising Business Register program aimed to merge over 30 ASIC-held business registries into a single platform to improve the government’s visibility over the business sector and reduce tax avoidance, phoenixing, and asset stripping.
The program began over five years ago and has cost over $1.5 billion so far without delivery. Financial Services Minister, Stephen Jones, attributes the $1 billion cost blowout to the previous regime but assures that the Albanese government is prioritizing the completion of the project transparently and responsibly.
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