The Tax Office is to request and collect information regarding about 5,000 licence holders in the fishing industry from a range of State government authorities across Australia eg NSW Fisheries, NSW Office of State Revenue, Qld Dept of Fisheries, Dept of Primary Industry (Vic). It will then data–match that information with Tax Office data to identify compliance with tax laws.
ATO on reported tax evasion
The Australian Tax Office received over 22,900 reports about suspected tax evasion in the six months to 31 December 2005. Reports with enough information for follow-up action or investigation led to over $26 million in tax and penalties being raised.
The most common reports were about:
* irregularities in pay as you go (PAYG) withholding – some businesses are not withholding an amount from payments to employees or are not sending in withheld amounts
* business income not being declared
* businesses in the cash economy
* income tax returns not being lodged, and
* non-business income not being declared.
People making reports about tax evasion included current or former employees, friends or acquaintances, current or former spouses or partners, customers of the business being reported and third parties who overheard something.
The five industries reported most often were:
* building and construction
* retail trade
* cafes and restaurants
* property and business services, and
* manufacturing.
Topics recently reported
* Businesses not declaring all of their cash income. Businesses must include all income in their tax returns, whether it is in cash or another form.
* Employees not being asked to complete a Tax file number declaration (form number NAT3092) and where necessary a Withholding declaration (NAT3093) so that the appropriate PAYG withholding amounts can be withheld.
o Every employee should complete a Tax file number declaration. Their employer should then complete the payer section of the declaration, send the original to the Tax Office within 14 days of the employee starting work, and keep a copy.
o Every employee should also give their employer a completed Withholding declaration if any adjustments need to be made to the standard rate of withholding.
What have the ATO observed in the community?
We are receiving calls alleging that some GST registered trades people are not providing tax invoices. Some consumers are tempted to pay cash and not ask for a tax invoice, but then find they have a problem if the work is faulty, or if they need to make a warranty or insurance claim.
Some tax evaders who were recently caught
A bricklayer was reported as not lodging activity statements for over a year. Our investigations resulted in over $47,000 in tax and penalties.
A restaurateur was reported as not meeting superannuation obligations to eligible employees and not sending the PAYG withholding amounts retained from payments to staff. The investigation resulted in over $78,000 in tax and penalties.
Individuals involved in the property and construction industry were reported to be claiming personal expenses for such things as a nanny, travel and extensions to their own home as business expenses. Investigations by ATO staff resulted in over $500,000 in tax and penalties.
An entertainment promoter was reported to be paying employees cash wages without withholding and sending amounts from payments. Investigations resulted in over $900,000 in tax and penalties.
A security company was reported to be only withholding 50% of the pay of its employees through the use of two time sheets. Investigations found one time sheet showing actual hours worked and the other showing half the hours which was used to record payment and tax for the mostly full-time employees. The investigation resulted in over $6 million in tax and penalties.
From ATO press release
Super to be recoverable by bankruptcy trustees
The Attorney-General announced revised proposals* on 27 July 2006 to amend the Bankruptcy Act 1966. Superannuation contributions made prior to bankruptcy with the intention to defeat creditors will now be recoverable by bankruptcy trustees. The proposals will apply to superannuation contributions made after 27 July 2006.
Previous proposals in 2003 and 2005 were abandoned prior to certain defeat in the Senate.
Current proposal
The Government decided in July 2006 not to proceed with earlier proposals to allow for recovery of ‘excessive’ superannuation contributions as these would have unduly complicated both the bankruptcy and superannuation systems. The July 2006 announcement is consistent with the Government’s plan to simplify and streamline superannuation.
The amendments to the Bankruptcy Act will prevent unscrupulous debtors from transferring assets into superannuation when bankruptcy is looming. However, genuine contributions to superannuation for retirement income purposes will be protected from recovery.
Proposed amendments to the Bankruptcy Act
An announcement from the Insolvency and Trustee Service Australia has stated that the amendments will:
- allow a bankruptcy trustee to recover the value of contributions made by the bankrupt to defeat creditors, where the contributions were made to the bankrupt’s own superannuation plan and that of a third party (along the lines of the current section 121)
- allow the trustee to recover contributions made by a person other than the bankrupt for the benefit of the bankrupt where the bankrupt’s main purpose in participating in the arrangement is to defeat creditors,
- provide that consideration given by the superannuation trustee for the contribution will be ignored in determining whether the contribution is recoverable by the bankruptcy trustee
- allow the Court to consider the bankrupt’s historical contributions pattern and whether any contributions were ‘out of character’ in determining whether they were made with the intention to defeat creditors,
- provide that the superannuation fund will not have to repay any fees and charges associated with the contributions or any taxes it has paid in relation to the contributions, and
- give the Official Receiver the power to issue a notice to the superannuation fund or funds that are holding the contributions that will put a freeze on the funds in order to prevent the bankrupt from rolling them over into another fund or otherwise dealing with them in circumstances where the trustee is entitled to recover them (the notice will be based upon the notice issued pursuant to section 139ZQ).
The effect of these amendments will be that payments to superannuation plans to defeat creditors would be recoverable in the same way as other payments or transfers to defeat creditors.
The amendments, once legislated, will apply to any contributions made after 27 July 2006.
Thanks to Colonial First State for this news based on Attorney-General, Philip Ruddock’s, Press Release 138/2006, 27 July 2006 ‘Government closes superannuation loophole in bankruptcy’.