Yesterday, the Assistant Treasurer, The Hon David Bradbury MP publicly released the Inspector-General of Taxation’s Report into his Review into the ATO’s use of benchmarking to target the cash economy. This report followed an extensive consultation effort, including feedback from a substantial number of Tax Institute members. Tax Institute members have long raised concerns about the effect on taxpayers inadvertently caught in this ATO compliance initiative, and the IGT’s report stemmed from our request that the subject matter be reviewed in our 2011 submission on the IGT’s work program.
The report largely vindicated member concerns, noting that the ATO has only made adjustments in 24 per cent of benchmarking audit cases. Most taxpayers that have suffered the costs and stress associated with an ATO audit or review as a result of this compliance initiative have done so for no ultimate benefit.
We broadly support the ATO’s targeted compliance activities intended to ensure that only those taxpayers that are inappropriately operating in the cash economy are caught. However, the commitment to better target these activities via implementation of most of the IGT’s recommendations is welcome.
We were somewhat disappointed by the rejection of two key recommendations:
- The first of these is intended to allow greater visibility on the differences between regional and metro business, which can be vast.
- The second of these is intended to allow taxpayers increasing levels of comfort where their record keeping or other evidence suggests little or reduced risk is posed by their activities.
We will continue to consult with the ATO in relation to the many key areas of potential improvement, and look forward to member input in this regard.