Ian Farmer

Technology and collaboration allow sharper focus

Greater leverage of technology and collaboration between Australian Government agencies has provided tax administration with a significant leap forward in accessing and analysing information to target risks.

The Australian Taxation Office's (ATO) main concern in the current economic environment is to protect Australia's tax base. The recently released 2009-10 Compliance Program reveals an unprecedented level of compliance activity backed by significant resources, improved technology and increased cooperation with other government agencies.

ATO compliance activity in the last 12 months has resulted in A$5 billion ($4.5 billion) additional tax collected and further A$8 billion additional liabilities raised. The ATO has received a further injection of resources which has significantly improved its capability to increase the compliance take in the year ahead.

While the ATO will be taking a lenient approach to those taxpayers that are in genuine financial hardship, for example by offering flexible payment arrangements, the ATO's main objective is to ensure a level playing field by ensuing that all taxpayers are paying their fair share of tax.

The increased level of compliance activity has significant implications for taxpayers across all market segments, from individuals, to wealthy families and large multinationals.

The key focus areas of the 2009-10 ATO Compliance Program are:

• Individuals, where it plans to contact 500,000 taxpayers about work related expense claims
• high net wealth individuals, families and company executives
• The SME market, where it will continue with its review of company groups with turnover between A$100 million and A$250 million, and
• The large market, where it will review a third of all large corporates with a turnover above A$250 million.

The ATO will utilise significant data matching capability and increased information exchange with other government agencies to review tax returns, including to check for correct reporting of shares, options and interest income and to trace payments received from overseas or paid from Australia to overseas accounts.

A heightened focus on cracking down on tax crime will see cases continuing to be taken through the courts where serious evasion has occurred.

Several recent court cases have shown that tax matters move quickly through the court process and we expect to see more disputes proceeding to litigation in the coming year.

The ATO Compliance Program is a clear reminder of the need for caution and diligence by taxpayers. The ATO uses a risk-based approach to target its compliance activities and its ability to identify tax risk is constantly being refined and enhanced.

Ian Farmer (ian.farmer@au.pwc.com), Sydney