Tax compliance and integrity measures
Increased ATO surveillance - take cover!
Going hand in hand with this Budget’s mantra of ‘all this without raising taxes’ comes the necessary shoring up of the tax base by giving the ATO extra funding to ensure the integrity of the tax system and “shine a light” on taxpayers’ tax affairs.
This Budget contains additional funding for the ATO to further strengthen the integrity of the tax compliance system.
Strengthening the Australian Business Number system
Aimed at disrupting the black economy without inconveniencing compliant businesses, the Government will strengthen the Australian Business Number system (ABN) by linking an ABN holder’s ability to retain their ABN to their tax compliance obligations.
By July 2021, ABN holders with an income tax obligation will be required to lodge their income tax return in order to retain their ABN and from July 2022 they will be required to confirm the accuracy of their details on the Australian Business Register annually.
The Budget provides further funding to assist with the ATO’s debt recovery procedures. This is aimed specifically at encouraging the on-time payment of, and recovery of, unpaid income tax, GST and superannuation by medium and large taxpayers.
The Government is increasing its data analytics abilities by more investment in its data processing capabilities.
The increased investment in the ATO’s data analytics capabilities is, to a large degree, aimed at improving its extensive data matching abilities and goes hand in hand with the extension and expansion of the Tax Avoidance Taskforce (discussed in more detail in the Corporates section). Data-matching is a powerful administrative and law enforcement tool that the ATO uses to detect patterns and relationships between the ATO’s highlighted risk areas and the data provided in, for example, a taxpayer’s income tax return.
The Government will establish a dedicated sham contracting unit within the Fair Work Ombudsman to address sham contracting behaviour engaged in by some employers, who ‘knowingly’ or ‘recklessly’ misrepresent employment relationships as contractor relationships to avoid their statutory obligations.
- New measure to match income tax compliance history to an ABN holder’s ability to retain their ABN
- Further funding for ATO’s debt recovery activities
- Increased funding for ATO’s data analytics capabilities
- The increased ability of the ATO to process and match data will result in an improved turnaround time for individuals and entities expecting refunds for their income tax returns.
- Businesses will face increased administrative requirements and a stricter compliance regime.