In last week’s TAXVINE - see 2011 TAXVINE No 31 (12 August 2011) - The Tax Institute called on the ATO to issue some public information explaining why returns may be subject to pre-assessment reviews and the delays that are involved with undertaking this process.
The ATO has provided the professional associations with the following message:
"Our use of risk models helps us detect overstated or fraudulent claims for refunds.
Since 1 July 2011, we have stopped over 49,000 returns with total refunds claimed of around $190 million that are believed to include overstated claims or be potentially fraudulent. Of these nearly 22,000 returns have been prepared and lodged by registered tax agents (total refunds claimed $98 million).
Each return stopped has been identified as containing some information that requires verification prior to issuing a notice of assessment. As data supplied by other parties continues to become available (such as payment summaries from employers) we regularly re-examine these returns and to date have released some 5,600 returns where we have been able to verify the information contained in the return that we were unable to do at the time of lodgment.
For those returns where this type of verification is not possible we are issuing review letters to taxpayers or their tax agents asking them to provide supporting documentation of their claims and where appropriate a satisfactory explanation as to how their claims relate to their income earning activities.
To date some 12,000 reviews have commenced or are currently with compliance officers with the review letters about to issue. Given the increased numbers of refunds that have been stopped so far this year compared to last year we are developing strategies to vastly increase this number in the coming weeks, focussing on those returns where tax agents may have the documentation and explanations to verify claims. We expect to commence reviewing the remaining taxpayers within the 12 weeks from lodgment timeframe previously advised.
Upon receipt of our review letter it would be appreciated if responses and documentation were provided in a timely manner to assist us in reviewing claims. We will continue to update Professional Associations on the progress of our strategies."
The Tax Institute welcomes this update, but more work needs to be done. We are encouraging the ATO to provide prompt and personalised information to affected agents about precisely why their clients’ returns are subject to pre-assessment reviews, and the records/substantiation that needs to be provided in order for returns to be progressed. We understand that the ATO is currently reviewing some of their call-centre scripting and other internal processes, with the intention of giving agents more timely and useful information about the pre-assessment reviews.
The Tax Institute is closely monitoring the situation, and will continue to advocate for fair treatment of agents and taxpayers that have correctly completed their returns.