16 Sep 1111 More on ATO pre-assessment reviews
MEMBER 169 writes:
"From reading the member feedback [last] week and my knowledge of the clients I have waiting the minimum 12 weeks for their refunds, it is plainly obvious that the ATO is relying on calculations of tax applicable to the income declared and pulling the returns when the PAYG seems too high. This might seem practical but it cannot work effectively unless the taxpayer works for a full year in one job and has normal PAYG instalments deducted.
I am in a country area and a lot of my 'I' returns are for shearers, wool classers, meat workers, forestry workers and other agricultural pursuits that are seasonal. These workers do not know what their income will be for the year and how many weeks they will have paying work. Workers in the shearing industry generally have a fixed percentage of their income deducted for tax because they can have 30 or so employers in any one year. It is not possible to align PAYG and income to any table and most prefer to play it safe and use a higher percentage so that they don't end up with a bill at the end of the year.
Last year I experienced the bloody mindedness of ATO staff pulling returns which were eventually passed without fault but not without a lot of stuffing around providing the clients’ original payment summaries etc. This year I have the same situation again and one of the same clients affected. Apart from the shearing shed hand that went through the mill last year, all the income and PAYG information on the returns was available on the Portal before the returns were lodged so it appears that the selection of returns for further investigation is taking place at least one step too early and not giving consideration to employer information that has already been received - or do the ATO think a lowly meat works labourer might be in collaboration with a multinational employer to scam an extra couple of hundred dollars?
I understand there are baddies out there - I know my returns will pass muster and the client will eventually be happy again. It is obvious though from the statistics quoted that there are practitioners out there who think they are clever and can get a better result and build a clientele as a consequence. I had one client call me after doing his return who asked me not to lodge because he had gone somewhere else and they had got him an extra $4000. I know that was not possible legally but there are people who will do it.
The ATO used to have ex public accountants on their staff who did the liaison between practitioners and the ATO. Rather than using mindless and uncompromising software to bludgeon a lot of people to find out who the baddies are, why not use the old ex-accountant who knows the industry and how it operates as well as a lot of the practitioners themselves? I think they would be excellent sleuths to ferret out information and find out where the problems lie, the ATO can continue its compliance testing but without their present sophisticated but draconian approach and between them a pretty good picture should emerge that will let the Tax Practitioners Board do the rest. Software is good for keeping honest people honest – you need intelligence to get the others."
MEMBER 170 writes:
"Fellow Tax Agents, with the 12 week fraud letters. I suggest you look to see if the refund is more than $5,000 (or close) and whether when the ITR was lodged a PAYG Summary on the Pre-fill was missing. If this is the case then the ATO thinks you are lodging a fraudulent PAYG Summary to make a big refund, it is that simple.
I have had five 12 week fraud letter and each one has these parameters. Even if a person has no deductions or only $300 it will get held up. I wonder where the 71% adjustments come from, maybe some more High Wealth Individual audit result reporting?"
MEMBER 171 writes:
"With reference to the 71%, did the ATO mention the amount of fraudulent refunds in dollars they stopped?
Also, how many of these returns were agent prepared as opposed to people doing it themselves? Saying they "adjusted" the returns doesn't mean anything. Maybe they just moved GIC from interest income to item 24?
Will they release the details of the adjustments and publish the common errors so we can all look at them prior to lodging the next year's returns? Maybe not, as you can get more revenue by levying penalties as opposed to writing fair, sensible and easy to understand tax law.
Proper tax advice is often not affordable to many people on low incomes and they tend to make the most mistakes from my experience. It's amazing how many retail assistants are still claiming their jeans and t-shirts when lodging returns themselves.
The ATO's letter to agents about the 12 week delays states:
'We are using specialist technology to help us identify and review returns which may contain missing and/or incorrect information. Claims outside normal individual or industry ranges will result in all aspects of a person's tax position being reviewed. Last year 71% of these returns were adjusted prior to the notices of assessment issuing.'
We eagerly await statistics on the current year program."
MEMBER 172 writes:
"Just remember, some of those 71%adjustments would have been to the date of birth information."
THE TAX INSTITUTE'S TAX COUNSEL TAMERA LANG COMMENTS:
"We are currently seeking information from the ATO to clarify their statistics.
The ATO is undertaking a program to investigate agents that have over 50 clients that are subject to pre-assessment reviews. The outcomes of these investigations may result in referrals to the Tax Practitioners Board."