ATO to target 'phoenix' arrangements

Part of the funding given to the Australian Taxation Office (ATO) in the Federal Budget will be used to target companies that ‘phoenix’ in order to avoid meeting their tax and superannuation commitments.

When a company ‘phoenixes’, it generally goes into liquidation before continuing through the creation of a new company.

The Commissioner of Taxation, Michael D’Ascenzo, said in the current conditions, the ATO anticipates that some employers will look to circumvent superannuation guarantee payments, often as part of phoenix activities.

As a result, the ATO is visiting around 8,000 employers who have been identified as high risk.

D’Ascenzo said that by the end of April, the ATO had completed 54 audits and raised more than $39 million in tax and penalties in relation to phoenix arrangements. The commissioner said a further 59 audits were in progress, and these investigations are expected to raise a further $45 million in tax and penalties by the end of this financial year.

The Government is also planning to release a discussion paper looking at ways to improve operations to counter the practices of phoenix operators, D’Ascenzo said.

The Budget funding will also be used to ensure wealthy Australians and large and medium-sized businesses meet their tax obligations. The Commissioner said the ATO would be focusing on high-income company executives and directors, as well as individuals with net wealth of $5 million to $30 million who use tax minimisation strategies. The ATO already has a program in place that targets individuals with more than $30 million.

Another focus of the ATO in the coming months will be on reported tax losses, the transfer of losses and the use of prior year tax losses in 2009—10.

“For example, we are concerned about taxpayers who, having previously claimed their receipts from share transactions to be on capital account (and thus eligible for the 50 per cent capital gains tax discount), now claim recent losses to be on revenue account,” D’Ascenzo said.

He was speaking yesterday at a National Institute of Accountants forum in Sydney.