ATO puts spotlight on investors

The Australian Taxation Office (ATO) has revealed an ‘early bird view’ of the areas its compliance program will address in 2008-09.

ATO second commissioner Jennie Granger said at tax time this year the ATO would pay close attention to investors, particularly in relation to the treatment of rental properties, dividends and interest, the sale of investments, ‘dodgy’ tax schemes and saving for retirement.

“The three key areas of risk continue to be rental properties, the stock market and the capital gains events that occur on the sale or transfer of these assets,” Granger said.

“Economic conditions, globalisation and enabling technologies are creating new challenges,” she said.

“People are managing a greater range of tax risks.”

On the reporting of dividends and interest, Granger said clients must not forget to report income earned overseas. By the end of May this year, the ATO had completed more than 160,000 review and audit cases in this area, with a further 20,000 in progress. Granger said these cases have identified $123.5 million owing in total revenue.

On the sale of investments, Granger said the ATO has “reason to believe that compliance with capital gains tax is improving”, but there is still room for improvement.

“We now have access to all state and territory property registers and we have recently secured share trading information from the three primary share registries,” Granger said.

According to the second commissioner, there is a need for superannuation members to actively monitor their accounts.

“It is a sad fact that we deal with many complaints from distressed ex-employees who have not kept an eye on their super and discovered only too late that their employer has not kept their contributions up to date.”

Granger also said clients will need to take steps to avoid exceeding the caps on super contributions.

This year the ATO will also focus on the salary packages of executives and directors and the work expense claims of employees. Highly paid executives and directors (those with income of over $1 million) will also come under increased scrutiny from the ATO in the coming year.

Granger said how small businesses earn their profits is also becoming increasingly diverse and that the ATO recognises that small business’ financial affairs are becoming more complex, with some struggling to meet their obligations. Granger said the ATO has re-engineered its assistance program to have a stronger emphasis on getting small business on track.

The ATO will also be expanding its coverage of income tax issues, including the sale of assets and investments, foreign source income and superannuation responsibilities of employers.

“Employers need to be aware of their super guarantee and choice eligibility obligations, payments and due dates, and the steps they need to take if they don’t meet their obligations.”

The ATO is also responding to the growth in self-managed super funds (SMSFs); the 47,000 new funds established last year brought the total number of SMSFs to 372,000. “That’s a lot of learner-plated funds on the road to retirement,” Granger said.

The ATO monitors the lodgement performance of all newly registered funds.

“We believe in and promote a ‘prevention is better than cure’ approach to tax and superannuation compliance,” Granger said.

This month the ATO will contact more than 380,000 people before they lodge their 2008 return, with these people being under increased scrutiny.