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Success to be determined by the implementation program

Publication date: 17 Aug 07 | Source: THE TAX INSTITUTE

“The ATO Compliance Program released earlier today is generally focused on communication and education” said Mr Peter Moltoni President, Taxation Institute of Australia.

“It shows the proposed focus of the ATO for the next 12 months and gives taxpayers and tax practitioners an opportunity to identify some potential problems and put in place a plan of action to deal with them”.

“The Taxation Institute commends the Commissioner not only for the carefully drafted document and the clear identification of key risk areas for the each of the key market segments, but also for the care taken to make sure that the messages contained in the document are being widely broadcast to key stakeholders” he added.

"Anybody who thinks they can avoid paying tax by not declaring income, hiding income offshore or entering into tax crimes needs to read this document. The document will help them understand the resources the ATO now has to cross-check assets and income through Australian and international agencies, they will read about the various parties that have been jailed and/or fined for these activities in the last year, and, with that knowledge they can make a risk assessment as to how the community expects them to behave and what they should do."

"Web based tools to assist in the preparation of Schedule 25A & Div 7A strategies are significant developments that will benefit taxpayers."

“The Taxation Institute is concerned that the Commissioner has listed on the program a number of areas where further clarification of the law is required. This could be said to be premature as Taxpayers need to fully understand what the law is and they then need time to change their processes and systems to be sure they comply. However, reviews of these transactions will not cause difficulties if the approach taken by the ATO in implementing the program is to identify and resolve issues, rather than to penalise."

“One area needing clarification is hybrid capital raisings" said Peter Moltoni

"There can be no quarrel with the concept of reviewing these transactions. However, it must be remembered that there are many contentious unresolved issues relating to these instruments. Any review needs to be undertaken on the basis of resolving these issues rather than confronting taxpayers suggesting that they have misapplied the law and seeking to penalise them. There needs to be education and resolution rather than confrontation - the success of the compliance program will be determined by the approach taken in its implementation."

Another possible area of concern is in relation to private equity transactions. Again, there can be no quarrel with reviewing these or any other type of transaction. However, if the ATO’s prima facie approach is that tax outcomes of a transaction are to be adjusted because of substantial amounts of debt employed to acquire an asset, then taxpayers will have cause to object to the methodology used to implement the program."

"The Compliance Program reads as a fair program. The ultimate assessment as to its fairness in approach will be determined by the attitude taken by the ATO officers in implementing the program. That assessment can only be made as the program progresses over the next 12 months" concluded Peter Moltoni.