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Education gives way to enforcement at ATO

THE Australian Tax Office has moved away from the help and education role it had during the introduction of the new tax system. Now, 90 per cent of the ATO’s GST field staff are involved in audit or verification activity. Across the country, there are almost 4000 staff involved in GST work.

The additional resources provided to the ATO in this year’s budget means that, on average, one in 10 businesses will have some form of review by the tax office.

Commissioner Michael Carmody recently warned business the ATO had significantly improved its risk assessment procedures, and it appears the building and construction area has been identified as a particular target area this year.

The ATO has reportedly been visiting businesses in that industry that have not lodged all their Business Activity Statements (BAS), and is urging them to lodge.

Failing to lodge a BAS may result in penalties and, unlike other ATO penalties, these can’t be claimed as tax deductions.

The amount of the penalty will depend on the size of the business and how overdue they are.

A small business with annual turnover less than $1million could be up for a fine of around $1900 if it had not yet lodged any of its four quarterly BAS forms.

With the end of the September quarter upon us, the next quarterly BAS is just around the corner, due on October 28. According to Mr Carmody the BAS still needs to be lodged, even if you don’t owe any money, or have already paid it.

For many businesses it’s the length of time it takes to complete that little brown form that is a major problem.

If you expect to get GST credits, but have not lodged previous BAS forms, there may be a way to get more time without attracting the failure to lodge penalty. It may be worthwhile lodging a BAS with a zero balance immediately, and then amending it later to put in the actual details.

The ATO has released a fact sheet explaining how to correct GST mistakes using your next BAS. According to the fact sheet, time limits don’t apply to corrections where you increase the amount of input tax credits. You will need to ensure the GST effect of the correction is less than $5000, however, if your business has annual turnover under $20 million. If the correction is more than $5000, you will need to revise the original BAS.

The ATO’s Perth-based GST Food and Retail team has recently sent a questionnaire out to food retailers who have elected to use a simplified accounting method for calculating GST on their BAS. It looks like the ATO will use the information to check whether those using one of the three simplified methods have a valid reason for doing so.

Businesses found ineligible to use a simplified accounting method will need to change to an appropriate accounting method and also amend previous BAS forms. According to the ATO, where tax has been underpaid as a result of using the wrong method, providing the error was a genuine mistake or misunderstanding, penalties will not be imposed.

An automatic penalty system will start operating for September quarter activity statements. The automated process will be triggered by late lodgment. It will apply the penalty and then automatically issue a penalty notice.

The failure to lodge penalty doesn’t apply to just activity statements. The ATO can impose the penalty on income tax returns for 2000-01 and later years, fringe benefit tax returns for the period commencing on April 1 2001, and Pay As You Go Withholding annual reports. The penalty can be imposed on both late lodged and unlodged documents.

If you do get a failure-to-lodge penalty, don’t be late paying it, because a general interest charge will be applied to any amount of the penalty outstanding after the due date for payment.

The ATO has warned people with outstanding quarterly Activity Statements they can expect to hear from the office within six weeks. For large payers, expect contact within a matter of days.

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