ATO Compliance Activities
1. Capital Gains Tax (CGT)
Capital gains tax is a major focus of the ATO’s compliance program. In particular, the ATO is concentrating on the following areas:
- Individuals and small businesses who do not report income from capital gains, particularly on the sale of shares and properties;
- The threshold tests for the small business concessions, including the application of losses;
- Capital gains tax reductions schemes.
N.B. Please ensure that you provide us with all the relevant information you have regarding your investments if you would like us to assist you with any GCT issues you may have.
2. The Cash Economy
The cash economy remains a high priority for the ATO.
Industries under focus include restaurants, cafes and takeaways, taxis, bartering, building and construction, the adult industry, and clubs and pubs.
Example - Restaurants, cafes and takeaways. In this industry, the ATO is looking at the following:
- Restaurants that have not disclosed all their cash takings, with one focus being group bookings over the Christmas period.
- The development of predictive indicators, such as:
- Cups of coffee per kilogram of coffee beans;
- Kebabs to each kebab ‘loaf’;
- The number of staff required for the number of tables; and
- Drawings from a business to determine if the drawings are adequate to support the lifestyle and financial commitments of the individual.
3. Low Doc Loans
Low doc loans are loans that do not require paperwork to prove income (the lending institution usually charges a higher rate of interest on these loans).
The ATO has begun auditing a number of people where income disclosed to lenders of low doc loans is substantially higher than that disclosed in their tax returns. The ATO is matching details from a selected range of low doc loans with the borrowers’ tax files.
4. Work Related Expenses
The ATO continues to conduct audits on work related expense claims. In particular the ATO is checking that the following claims are correctly calculated:
- Self-education expenses
- Car expenses (D1)
- Home office expenses (D5)
- Decline in value (D5)
N. B. Please ensure that you have kept the appropriate documents to substantiate your work related expense claims and that you can produce the documents if selected for a review.
5. Research & Development Tax Concession
In this area, the ATO is testing:
- whether expenditure supporting claims has, in fact, been incurred;
- if expenditure has been incurred, whether it was incurred by the company making the claim and not by another member within the non-consolidated group; and
- who actually owns, or benefits from, the R&D to which the expenditure relates.
N.B. Please ensure that all expenses claimed in relation to the R&D tax concession have actually been incurred. Further to this, where other entities have been involved in the R&D activities, establish that the R&D activities have been carried out on their behalf.