Industry criticism of the Australian Tax Office’s hard-nosed approach to GST audits has failed to sway the Federal Government.
Industry criticism of the Australian Tax Office’s hard-nosed approach to GST audits has failed to sway the Federal Government.
The ATO’s audit activity has created mounting concern among industry and accounting groups, who believe many businesses are being tripped up on technical breaches of tax law.
Critics include Motor Trade Association executive director Peter Fitzpatrick, who has urged “greater flexibility and empathy” in the ATO’s handling of motor vehicle dealers.
Mr Fitzpatrick said a key issue for motor dealers was the treatment of recipient created tax invoices, which were an example of the complex paperwork that has to be completed.
He acknowledged these forms often were not completed correctly but insisted there was no direct cost.
“What we are talking about here are clerical and administrative errors during the introduction of the country’s biggest tax changes,” Mr Fitzpatrick said.
Horwath director Russell Garvey said a particular concern was that audit testing was going back as far as July 2000, to the so-called education period. He said dealers were getting suspicious of the motive behind GST audits, since auditors appeared to be “fishing around until something turns up”.
“Dealers are starting to suspect that audits are just revenue raising exercises rather than educative in nature,” Mr Garvey said.
PKF tax partner Mark Pollock said scrap metal dealers and smash repairers were another industry targeted by the GST audit program.
He called on the ATO to give advance warning if it identified common mistakes in specified industries and provide a period of time to rectify problem errors.
“Denying a GST input tax credit because a bit of paperwork wasn’t filled in can be quite severe,” Mr Pollock said.
He said interest penalties applied in Australia were among the highest in the world.
A broader issue was that most small businesses had not been subject to a tax audit for about 15 years and therefore may have become complacent.
As well as GST audits, which have been running for nearly a year, Mr Pollock said the ATO had started conducting fringe benefits tax and income tax audits over the past couple of months.
Businesses seeking a softer touch from the ATO could draw little comfort from a letter to Mr Fitzpatrick from Federal Revenue Minister Mal Brough.
It said the ATO was targeting industry sectors judged to have “substantial levels of compliance risk”.
The letter also makes clear that audits may examine transactions dating back to the commencement of GST if they are identified as a “substantial” risk.
