Australia

Details

  • Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 2/08/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Dermot Gaffney

Dermot Gaffney
Head of Indirect Tax

+61 2 9455 9398

dgaffney1@kpmg.com.au

ATO 2013-14 Compliance Focus – Integrity of Business System 

by Dermot Gaffney, Indirect Tax Specialist

The recently published Australian Taxation Office (ATO) Compliance Program for Goods and Services Tax (GST) needs to be looked at against the background where tax revenues are under pressure, and it is becoming increasingly important for taxpayers to manage their tax risk and governance.

The Program specifically states that the key focus will be on the integrity of business systems (IBS) and processes – particularly for taxpayers in the mining, wholesale trade, manufacturing, financial and insurance services, government, and retail sectors.

 

This should not be a surprise given that, according to the ATO, in 2011/12 their compliance activity in this area with the Large Business Sector yielded over $254m of additional revenue.

 

The errors identified fell into four main areas:

  • 39 percent arose from Business Activity Statement (BAS) preparation errors
  • 22 percent from system issues
  • 16 percent from related entities miscommunication
  • 12 percent from technical understanding and interpretation.


Common errors were incorrect classification of items at the master data level, manual adjustments outside of the enterprise resource planning (ERP) system, and problems with systems upgrades.

 

The ATO’s focus on this area has been ongoing for the last few years and with additional collections of close to $1bn over the last three years, their continued focus is hardly surprising. It should encourage ‘at-risk’ taxpayers to closely review how their business system interacts with GST and seek to proactively address any issues prior to the commencement of ATO compliance activity. This should also include seeking specialist GST input when designing and implementing new business systems, which is frequently where the problems originate.

 

One wonders for how long the ATO’s current ‘light touch’ approach will continue, especially against the background of increased pressure on overall revenue yields.

 

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