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23 Mar 12 ATO Income Tax Refund Integrity Checks Program

The Tax Institute and the ATO have been communicating in relation to the income tax refund integrity checks program and The Tax Institute notes that it has escalated several matters to the ATO on behalf of Members for resolution to which the ATO is responding (please refer to comments noted in the “Member Feedback” section in earlier issues of TaxVine). This is an issue of which Tax Institute Members are acutely aware. The ATO has advised that the top two reasons for disallowed refunds involve:

  • issues with spouse rebate claims; and
  • issues with education tax refund claims.

The ATO has advised The Tax Institute that it is developing additional approaches to manage the volume of held returns. These include:

  • Prioritising action on aged cases – this is being supported by a significant increase in manpower on this work as a corporate priority for the ATO (around 200 people working on the backlog);
  • Visiting tax agents with 20 or more held returns to expedite action – most of these agent have now been contacted and visits confirmed with 30 agents so far which commenced on 13 March 2012;
  • Implementation of the default assessment provision (under s 167 Income Tax Assessment Act 1936 (Cth)) and providing for taxpayers to lodge an amended assessment with an explanation and appropriate substantiation if they believe the assessment is incorrect – more than 3000 assessments have been issued in this way so far with only 50 requests for reviews received by the ATO so far.

The Tax Institute has actioned several cases with the ATO which the ATO is now working on. Members have already reported back to The Tax Institute noting they have received resolution on some of their matters already. Members are invited to provide feedback to The Tax Institute through Tax Policy on this process, particularly in relation to the new approaches being implemented by the ATO.

BAS Agents Advisory Group – Reporting on Payments in the Building Industry

Further to the summary included in 2012 TaxVine No. 8 in relation to the BASAAG meeting held on 8 March 2012, the ATO has issued some more detailed information in relation to the new reporting system that will be implemented commencing 1 July 2012 in respect of certain payments made in the building industry. The ATO has advised the following:

  • A new reporting system was announced in the 2011-12 Federal Budget that will require businesses in the building and construction industry to report payments they make to contractors for building and construction services to the ATO each year.
  • The system will commence on 1 July 2012, with the first annual report due for the year ending 30 June 2013. The due date for the annual report is 21 July, but the ATO will allow quarterly BAS lodgers to lodge by 28 July for the first year.
  • The aim of the system is to:

-    improve compliance with tax obligations by contractors in the building and construction industry; and
-    create a level playing field for businesses and improve tax fairness within the industry.

  • Businesses required to report will only do so annually and will only need to report information they should already be keeping. This reportable information relates to payments for which the business can claim a tax deduction (i.e. payments to contractors) and a GST input tax credit.
  • The new system will operate under the existing payment, Australian business number and identification verification system. It will be activated through a regulation.
  • Contractors who are compliant with taxation obligations and who do not pay other contractors will not have any additional obligations under the new system.
  • Once the regulations are finalised, the ATO will commence an education program to ensure businesses and their representatives are aware of the new arrangements and know how to comply.

Members are encouraged to provide any comments or concerns they may have on this proposed system to The Tax Institute through Tax Policy.


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