IT IS official. The GST is a sideshow for the main event – a tighter tax collection regime.
IT IS official. The GST is a sideshow for the main event – a tighter tax collection regime.
The Australian Tax Office has created the tighter regime by treating businesses the way it has treated employees for the past 50 years – taxing them as they earn their income.
Tax Commissioner Michael Carmody said in a recent speech that the new tax system provided “potentially rich new sources of intelligence”.
It is no secret the ATO wanted the GST because it enabled the ATO to identify businesses operating outside the system.
The Australian Business Number is one way the ATO does this.
Jackson McDonald tax consultant Graham Harrison said the ABN was the “Australia Card for business”.
Businesses have to quote an ABN to redeem any input tax credits.
“It is the Government’s plan that every business transaction flowing through the system will have an ABN attached to it,” Mr Harrison said.
“This provides the tax commissioner with a fantastic audit trail.
“Then there is the Business Activity Statement – a quarterly or monthly return to the ATO in which businesses will report real-time business trading information.
“The ATO is the envy of revenue authorities around the world, who would love to have this sort of data coming to them on a regular basis.”
The ATO’s plans include:
l Identifying mismatches between the ABN register and records of businesses lodging income tax returns;
l Matching income and expense data from the BAS against income tax return data;
l Comparing GST turnover with Pay As You Go instalment income to ensure consistency;
l Using remittance of ‘no-ABN’ withholding amounts to identify people operating outside the system;
l Mapping transition of Prescribed Payment System participants to the new tax system by monitoring the ABN registration take-up rates, the lodgement of BAS and income tax returns and PAYG remittances; and
l Developing business norms and trends for particular industry, with salaries and wage expenses compared to turnover. The ratio of GST input tax credits claims to turnover will also be monitored.
Combined Small Business Associations of WA president Oliver Moon believes the GST will flush out the ‘black economy’.
“We feel everyone should meet their tax obligations,” Mr Moon said.
Mr Harrison said most businesses and their accountants were yet to come to terms with the cashflow challenges of paying income tax as well as GST in real time every quarter.
“When the first Business Activity Statement is due in early November, many businesses will find they haven’t put aside sufficient funds to meet their income tax and GST liabilities,” he said.
“Small businesses would be wise to prepare for the GST aftershock as the true nature of the new tax system becomes clear.”
The Australian Tax Office has created the tighter regime by treating businesses the way it has treated employees for the past 50 years – taxing them as they earn their income.
Tax Commissioner Michael Carmody said in a recent speech that the new tax system provided “potentially rich new sources of intelligence”.
It is no secret the ATO wanted the GST because it enabled the ATO to identify businesses operating outside the system.
The Australian Business Number is one way the ATO does this.
Jackson McDonald tax consultant Graham Harrison said the ABN was the “Australia Card for business”.
Businesses have to quote an ABN to redeem any input tax credits.
“It is the Government’s plan that every business transaction flowing through the system will have an ABN attached to it,” Mr Harrison said.
“This provides the tax commissioner with a fantastic audit trail.
“Then there is the Business Activity Statement – a quarterly or monthly return to the ATO in which businesses will report real-time business trading information.
“The ATO is the envy of revenue authorities around the world, who would love to have this sort of data coming to them on a regular basis.”
The ATO’s plans include:
l Identifying mismatches between the ABN register and records of businesses lodging income tax returns;
l Matching income and expense data from the BAS against income tax return data;
l Comparing GST turnover with Pay As You Go instalment income to ensure consistency;
l Using remittance of ‘no-ABN’ withholding amounts to identify people operating outside the system;
l Mapping transition of Prescribed Payment System participants to the new tax system by monitoring the ABN registration take-up rates, the lodgement of BAS and income tax returns and PAYG remittances; and
l Developing business norms and trends for particular industry, with salaries and wage expenses compared to turnover. The ratio of GST input tax credits claims to turnover will also be monitored.
Combined Small Business Associations of WA president Oliver Moon believes the GST will flush out the ‘black economy’.
“We feel everyone should meet their tax obligations,” Mr Moon said.
Mr Harrison said most businesses and their accountants were yet to come to terms with the cashflow challenges of paying income tax as well as GST in real time every quarter.
“When the first Business Activity Statement is due in early November, many businesses will find they haven’t put aside sufficient funds to meet their income tax and GST liabilities,” he said.
“Small businesses would be wise to prepare for the GST aftershock as the true nature of the new tax system becomes clear.”
