05 Apr 12 On ATO letters re foreign income
MEMBER 84 writes:
“With regards to the ATO correspondence regarding the default assessments for property, it appears the ATO is now extending that approach to foreign income. In 2011 a couple of clients received letters from the ATO advising that information had been received from AUSTRAC that money had been transferred from another country to our client’s bank account. That letter asked clients to check whether all foreign income had been declared and if it had been declared correctly no further action was required. Our clients duly checked and ascertained that the money was not income or was properly declared , and duly took no action. We are now receiving letters from the ATO saying that they did not receive a response from the clients and determined that the transfers are assessable income and intend to modify the client’s returns accordingly. Naturally, this means we now have to proceed down the line to explain to the ATO what these payments are for. If we had known the ATO was just going to assume all foreign transfers are income, we could have responded back in 2011 when the information was more current. This is particularly galling in relation to the most recent letter where the money has gone into a joint bank account back in 2008, was income of the husband and properly declared in the husband’s tax return, but the ATO in its infinite wisdom is assuming it is income of the wife.
I think this is probably the thin edge of the wedge and it won’t be long before the ATO takes the view that any transaction it becomes aware of must be income. Why not make any old assumption? This just reinforces my view that the ATO is run by people completely divorced from the real world and have no regard to how much cost their ham fisted administration of the tax system imposes on the general community, and furthermore my own personal assumption is that this situation can’t improve until there is a new tax Commissioner.”