Tax office warns small businesses:
expect scrutiny on your tax returns
Tax office warns small businesses: expect scrutiny on your tax returns
May 26, 2021 — 5.30pm
The Australian Taxation Office is warning the nation’s 4.2 million small businesses to expect more policing of tax returns this year following a reprieve at the height of the coronavirus pandemic.
Speaking at a Chartered Accountants Australia and New Zealand event on Wednesday, ATO deputy commissioner of small business Deborah Jenkins said the watchdog was focused on an estimated $11.1 billion a year in net tax from small businesses that analysis shows should be paid. This extra sum between what is paid in tax and what the ATO estimates should be paid is known as the “tax gap”.
She said the ATO would be carefully monitoring third party data over the next few months to track $390 billion in contract income, scrutinising loss claims and temporary full expensing measures, and ensuring private and business activities are accounted for separately in tax return claims. However, she acknowledged some companies were still finding it tough during the pandemic and those who do their best to report accurately would be managed with empathy and understanding.
“We’ve all heard of the dual-speed economy. In my view, the current environment is more of a multi-speed economy. Some businesses are recovering well, and others continue to struggle. Some haven’t seen much change at all,” Ms Jenkins said.
Identifying which businesses are struggling or recovering is difficult, she said, adding the industry or location of the company was not always a straightforward guideline with some able to pivot to remote work and online operations.
About 70 per cent of small businesses, defined as companies with annual turnover under $10 million, are attempting to report accurately and pay the right about of tax.
But Ms Jenkins said a crucial focus will be the 4 per cent of companies involved in deliberately misleading the tax office with “shadow economy behaviour”.
Ensuring businesses are aware of their super guarantee obligations is also on the list of priorities.
“Separate to shadow economy behaviour, more than $5 billion of the small business income tax gap is the result of other, less deliberate behaviour – making honest mistakes, poor record keeping and perhaps being confused about, or misunderstanding obligations,” she said.
She said a small group of tax agents who use their position to take advantage or undermine the law would see swift and firm action, informed by data of the tax practitioner’s own financial situation, their practice and clients.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.
Published: 28/06/2021 17h30