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Monday, December 20, 2004
 
Major change accounced for income tax self assessment system

An extensive overhaul of the Income Tax Self Assessment regime is set to proceed after the Federal Treasurer announced his decision to adopt all 54 recommendations made by a Treasury-commissioned review into the system. The announcement, made on 16 December 2004, will result in extensive refinements to the current self assessment system and is claimed to move the balance of fairness markedly in favour of taxpayers who act in good faith.

Key recommendations include reducing the time in which the ATO is permitted to begin auditing individuals and businesses within a wide range of situations from four years to two years. Mr Costello estimates approximately 8 million individual taxpayers and over 745,000 very small businesses will now have shorter period of review. The time in which the ATO can being audits pursuant to the anti-avoidance provisions will also be reduced.

The review aims to improve certainty through establishing a stronger framework for the timely provision of advice by the ATO to taxpayers and will introduce ways to make advice more accessible and binding in a wider range of cases. Interest and penalties arising out of taxpayer errors resulting from uncertainties in the system will also be refined.

Most changes are proposed to take effect from the 2004-05 income year with legislation to be introduced with sufficient time for it to be passed before 30 June 2005.

The report can be obtained from http://selfassessment.treasury.gov.au.



Monday, December 06, 2004
 
Faster private tax rulings
The ATO will give large companies access to an accelerated system for obtaining private rulings on unorthodox tax structures in a move to encourage them to seek approval before embarking on major transactions. In return, businesses will be expected to make full disclosures of information and attend pre-ruling briefings with senior tax representatives.
Tax Commissioner Michael Carmody wants to support tax compliance as a corporate governance issue by offering commercially realistic turnaround times for rulings on major transactions. Complex private rulings will be assigned a senior case manager with a centralised point of reference in the office of the chief tax counsel.
Whilst details of precise turnaround times are yet to be announced, the accelerated system will be of great assistance in a variety of industries where market pressures often prohibit participants from obtaining private rulings before engaging in complex transactions.


Thursday, December 02, 2004
 

ATO getting tough on SMSFs

The ATO is getting much tougher with self-managed super funds that blatantly ignore superannuation laws. It has recently imposed heavy sanctions against 10 funds which could result in them losing nearly half their assets in penalty taxes.

Common offences identified by the ATO were:

  • allowing the fund to make loans or provide financial assistance to members or their relatives;
  • giving members early access to preserved superannuation benefits (eg by allowing the fund to pay off a member's home loan);
  • using assets of the fund as security for a personal loan to a member;
  • permitting the fund to invest more than 5% of its assets in investments associated with members or trustees. (Note: This limit does not apply when funds invest in premises used by a member's business.)

Auditors are obliged to report contraventions to the ATO. The ATO can then classify the fund as non-complying, disqualify trustees, ask trustees to make enforceable undertakings, apply to the court for an order requiring compliance, and/or seek civil penalties against trustees.

The ATO's tough approach coincides with preparation for the Federal Government's long-awaiting introduction of fund choice for members in July next year. More information about SMSF regulation is available at http://www.ato.gov.au/super/.