- Penalties on the company and management can be imposed for false or misleading statements
- incorrect disclosures identified by the Australian Taxation Office (ATO) lead to enquires (thus disruption, cost, and potentially further queries)
- errors could call into question a company’s tax governance process
- disclosure errors are often in due diligence context and can taint a prospective purchaser’s views
- there is a risk that the exclusion of a schedule means the return has not been lodged (and thus no assessment and no time bar).
The 2012 company tax return instructions were 124 pages long. Many of the labels are not self explanatory. For example:
- debt balance disclosures (the need to show average based on different measurement points)
- bad debt write offs versus provisions
- Taxation of Financial Arrangements (ToFA)
- Capital Gains Tax (CGT) events (there’s probably an event, albeit a disregarded one, every year)
- unrealised losses - is a Continuity of Ownership Test (COT) failure perpetually disclosed?
- foreign transactions.
Earlier in the month the ATO released the proposed changes to the tax forms for 2013. Some of the significant changes among the (approximate) 40 company changes are:
- more IDS and Research and Development (R&D) questions
- new Rights To Future Income (RTFI) tax consolidation and tax loss carry back disclosures
- a totally new CGT schedule
- the removal of the capital allowances schedule.
Are your previous disclosures correct? Will you keep up with the new developments or remain stuck in a lime green past?