A HARDER enforcement line on GST payment by the Australian Tax Office is expected to create a second wave of business closures.
A HARDER enforcement line on GST payment by the Australian Tax Office is expected to create a second wave of business closures.
The first wave of closures was forced by businesses either thinking the GST would be too hard to deal with, or through cash flow problems caused by mishandling of GST monies they had collected.
Tax Commissioner Michael Carmody said the ATO would start taking a harder line on people who were not meeting their tax obligations under the GST.
Barrington Partners partner Roger Sullivan said problems would start emerging when the ATO started taking a closer look at some companies’ books.
“Once these audits start a lot of businesses will start closing,” Mr Sullivan said.
“We’re finding increasingly, as we’re coming to do people’s accounts, that there are some shambles waiting to fall on them.
“Second-hand goods are a classic. Under the old wholesale sales tax system you didn’t have to pay, but under GST you do.
“Another classic case is a truck driver who has traded in his own vehicle on a new one and received $80,000 for the trade in. That $80,000 is subject to GST.
“Say he did that trade in 18 months ago and didn’t realise there was GST owing. The average interest rate is 13 per cent for that period and if the ATO decided to put the usual 25 per cent penalty on top of that the truck driver could find himself facing a tax bill of $10,000.
“When the ATO starts doing audits on Personal Services Income and Pay As You Go tax instalments there will be hell to pay.”
Fallon Group partner Tony Ince said most businesses were handling standard GST transactions well.
“It’s more the one-off contracts that are causing the problems,” he said.
“And the ATO is starting to toughen up now.”
The ATO is trying to recruit an extra 2,700 auditors to help it enforce GST collection.
It has already sounded a warning to the 96,000 small businesses that had missed two Business Activity Statement lodgement deadlines, saying they faced fines of around $600 if they did not bring their tax statements up to date.
The ATO has also managed to jail someone for GST fraud.
David Dulhunty was found guilty of tax fraud by improperly claiming input tax credits.
Mr Sullivan said the ATO’s move to increase its audit activity should be welcomed, despite the unpleasant consequences it could create.
The first wave of closures was forced by businesses either thinking the GST would be too hard to deal with, or through cash flow problems caused by mishandling of GST monies they had collected.
Tax Commissioner Michael Carmody said the ATO would start taking a harder line on people who were not meeting their tax obligations under the GST.
Barrington Partners partner Roger Sullivan said problems would start emerging when the ATO started taking a closer look at some companies’ books.
“Once these audits start a lot of businesses will start closing,” Mr Sullivan said.
“We’re finding increasingly, as we’re coming to do people’s accounts, that there are some shambles waiting to fall on them.
“Second-hand goods are a classic. Under the old wholesale sales tax system you didn’t have to pay, but under GST you do.
“Another classic case is a truck driver who has traded in his own vehicle on a new one and received $80,000 for the trade in. That $80,000 is subject to GST.
“Say he did that trade in 18 months ago and didn’t realise there was GST owing. The average interest rate is 13 per cent for that period and if the ATO decided to put the usual 25 per cent penalty on top of that the truck driver could find himself facing a tax bill of $10,000.
“When the ATO starts doing audits on Personal Services Income and Pay As You Go tax instalments there will be hell to pay.”
Fallon Group partner Tony Ince said most businesses were handling standard GST transactions well.
“It’s more the one-off contracts that are causing the problems,” he said.
“And the ATO is starting to toughen up now.”
The ATO is trying to recruit an extra 2,700 auditors to help it enforce GST collection.
It has already sounded a warning to the 96,000 small businesses that had missed two Business Activity Statement lodgement deadlines, saying they faced fines of around $600 if they did not bring their tax statements up to date.
The ATO has also managed to jail someone for GST fraud.
David Dulhunty was found guilty of tax fraud by improperly claiming input tax credits.
Mr Sullivan said the ATO’s move to increase its audit activity should be welcomed, despite the unpleasant consequences it could create.
