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  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 12/12/2013

Australia - ATO 2013-14 Compliance Program 

GITB Australia

ATO 2013–14 Compliance Focus – “Integrity of Business Systems”

In the current environment where tax revenues are under pressure, revenue authorities around the world are struggling to maintain their levels of tax collections, and Australia is no exception. It is against this background that the compliance focus of the Australian Taxation Office (ATO) is becoming increasingly relevant to taxpayers seeking to manage their tax risk and governance.


The ATO has recently released its 2013–14 Compliance Program specifically noting that a key GST focus area will be the integrity of business systems (IBS) and processes – particularly for taxpayers in the mining; wholesale trade; manufacturing; financial and insurance services; government; and the retail sector.


This focus area should not be a surprise given that according to the ATO, in 2011/12, the large business sector reported an alarmingly high rate of errors in GST reporting, and their compliance activity in this area yielded over 254 million Australian dollar (AUD) of additional revenue. They have categorized the errors across four main areas: 39 percent of errors arose from Business Activity Statement (BAS) preparation errors; 22 percent from system issues; 16 percent from related entities miscommunication and 12 percent from technical understanding and interpretation.


Common errors were incorrect classification of items at the master data level, manual adjustments outside of the ERP (Enterprise Resource Planning) system, and problems with systems upgrades. In the ATO’s internal risk assessment, deficiencies in the management of business systems and inadequate processes that result in understatement of GST liabilities continue to be rated high risk.


The ATO’s focus on this area has been underway for the last few years and with additional collections of close to AUD1 billion over the last three years, their continued focus in this area is hardly surprising and 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. Going forward, this focus should also include seeking specialist GST input when designing and implementing new business systems, which is frequently where the problems originate.


The approach taken by the ATO is consistent with the approach already adopted by revenue authorities in other jurisdictions when enforcing indirect tax compliance. The ATO appears to be increasing its focus in the IBS space, and one wonders for how long their current “light touch” approach can continue, especially against the background of increased pressure on overall revenue yields.

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Global Indirect Tax Brief - December 2013

GITB - December 2013
Global indirect tax brief brief brings together articles on international VAT developments, written by KPMG member firms' VAT professionals worldwide and will be of interest to anyone managing VAT in an international business environment.

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