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06 Jun 088 ATO’S Active Compliance Working Group

The ATO’s Active Compliance Working Group held a teleconference on Thursday 5 June 2008. The key issue on the agenda the three draft Miscellaneous Taxation Rulings on the penalties, published on 14 May 2008 (see 2008 TAXVINE No 19 (15) (16 May 2008)). Despite claims that they merely restate the previous 1994 rulings they in fact represent a major departure from past practice in terms of what is an audit. A 'tax audit' now covers not only audits the Commissioner undertakes to ascertain an entity's tax-related liability but any examination of an entity's financial affairs, including record-keeping audits, risk reviews, and verification checks. This has major penalty implications for all taxpayers. What is of concern to the Taxation Institute, and was expressed during the meeting, is that:

  • the drafts are being used now in current reviews (audits) despite the Rulings being a draft;
  • they reverse 10 years of practice and back date their operation (which is contrary to the Inspector-General’s recommendations in respect of the ATO reversing longstanding practices); and
  • it will increase the costs of audit insurance.

They will also have a major impact on the efficiency of ATO operations as taxpayers should be now insisting on formal processes due to the increase in penalty risk.

The Taxation Institute also raised the issue of the difficulties associated with audits being conducted by an ATO Office in different states/territories which are remote from the residency of the taxpayer and the process for transferring it, at the notification stage, to the state of the taxpayer’s residency (assuming the ATO expertise exits in that state). Other issues raised concerned the compliance difficulties associated with the approved form for voluntary disclosures and tape recording of audit/settlement discussions. Updates were provided on progress of replacing the Compliance Toolkit with a one stop audit page on the website.

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