ATO funding for crackdown on GST compliance

The $337.5 million boost in funding to the Australian Taxation Office (ATO) over four years is clear evidence that the Government believes businesses are avoiding their Goods and Services Tax (GST) responsibilities, according to BDO.

The funding is one of the announcements made in the Budget last night that also included a range of tax changes relating to the GST. It is expected that the funding boost, aimed at improving GST compliance, will bring in $2.7 billion in revenue. This will be achieved by identifying fraudulent GST refunds, systematic under-reporting of GST liabilities, non-lodgement of GST returns and non-payment of GST debts.

BDO tax partner David Wilson said the GST changes represent the most significant alterations to the GST regime since its introduction in 2000 by the Howard Government. He added that he is generally supportive of the changes.

“It’s clear the ATO believes many businesses are deliberately or inadvertently avoiding their GST responsibilities,” he said. “While it is believed it is not a big problem at the top end of town, small to medium-size businesses will become the focus of a program designed to crack down on GST fraud. This will certainly worry a few of the less compliant businesses out there.”

He added that the Government also aims to collect an additional $1.74 billion over four years in non-GST taxation.

Wilson said the significant changes include:

• Revamping the cross-border transactions rules by implementing the recommendations of the Board of Taxation Review, which among other things no longer requires all non-residents to register for Australian GST;
• Restructuring the margin scheme provisions to clarify and simplify the rules and ensure greater certainty for taxpayers on issues surrounding the use of valuations when selling properties that are part of a business;
• Increasing the threshold above which businesses need to interact with the financial supply provisions from $50,000 to $150,000 of input tax credits;
• Protecting the GST base by reducing opportunities for businesses to inappropriately take advantage of the reduced input tax credit concessions by bundling services; and
• Allowing small businesses accounting for GST on a cash basis to claim input tax credits up front in relation to hire purchase arrangements.