With the festive season and the 2018 New Year approaching, here are a few target areas which can get you onto the Commissioner’s Christmas (and New Year) audit list.
Property developers – the main audit areas for this group of businesses centres on the following:
- Have ITCs been over-claimed?
- What is the basis that developer is claiming full ITCs (ie. Selling straight after completion of construction) and have their intentions changed.
- Has the appropriate amount of GST been paid on the sale of developed property?
- For once off developments the issues extend from GST the question of whether the developed property is a revenue generating activity from an isolated transaction.
- Was the developer entitled to apply the margin scheme or sale of a going concern concession?
Capital gains tax (CGT) non-disclosure and under-reporting – The Commissioner continues to see businesses engaged in complex restructuring that attempt to disguise asset sales or manipulate asset valuations to artificially reduce their capital gains tax (CGT) liabilities. Some businesses attempt to reclassify revenue and capital items so they can inappropriately access concessional tax treatments. Failure to disclose CGT events or claiming small business concessions when ineligible will also bring the Commissioner’s attention to your door.The ATO will conduct a number of audits and reviews to identify incorrectly reported (or non-reported) capital gains and losses. Their continued focus is on ensuring that foreign residents disposing of Australian property disclose their transactions and pay capital gains tax where liable. The ATO will continue to data match information from the office of state revenue with information recorded in the tax returns.
Companies raising capital through an IPO or the issue of shares and or options – have they claimed input tax credits (ITCs) on input taxed financials supplies and has the “financial acquisitions test” (FAT) been breached? – as capital raising information is readily available through the ASX and the costs of such activities is high, this is an easy target area for the ATO to devote their audit teams towards.
The ATO will also be targeting Uber and Airbnb operators: with a focus on under reported income. For Airbnb operators – any Capital Gains Tax arising from disposing of their property and the property was generally available for rent. For Uber drivers – GST and income tax is subjected on the gross fare and that they are complying with all legislative requirements.
Small Business – in particular;
- Internet businesses – whether internet businesses are disclosing the correct amount of income and paying the appropriate amount of GST on their transactions;
- Have all criteria been met in order for the Taxpayer to apply the small business tax concessions;
- where some individuals continue to split their Personal Services Income (PSI) with an associate to lower their tax debt, the ATO are particularly getting more vigilant in enforcing the PSI rules;
If you find that you fall within one or more of the Commissioner’s Christmas wish list above, we encourage you to seek advice from us to ensure you do not become the ATO’s audit target for the New Year.