Showing posts with label ATO. Show all posts
Showing posts with label ATO. Show all posts

Monday, 31 July 2017

Why doesn't the Turnbull Government do more to address domestic tax avoidance?


So why is it that the Turnbull Coalition Government, home to more than one millionaire, continues to allow a set of taxation rules which favour those with both wealth and high incomes over those with only average to low incomes and little to no wealth?


According to the Australian Taxation Office (ATO) – now underfunded, undermanned and demoralised – there is an issue with trusts being used for tax avoidance:

We focus on differences between distributable income of a trust and its net [taxable] income which provides opportunities for those receiving the economic benefit of trust distributions to avoid paying tax on them.

In other words; discretionary trusts are used by high-income earners to distribute investment income to beneficiaries on lower marginal tax rates, in the process reducing the overall amount of tax paid and current rules allow income to be diverted to other family members, such as stay-at-home mothers or fathers, or to dependents over the age of 18, such as children at university, college or Tafe.

Australian Finance Minister and Liberal Senator for Western Australia Mathias Cormann characterises proposals to alter taxation rates on trusts to minimise their use as tax avoidance vehicles as a “tax grab”. Well he would wouldn’t he, with so many political mates to defend.

As for collecting existing tax liabilities……

The ability to enforce payment obligations and pursue avoidance schemes has diminished since 2014 when first the Abbott Coalition Government and then later the Turnbull Coalition Government cut ATO staffing numbers.

The Community and Public Sector Union clearly told the Treasurer in 2017 that:

While the public is supportive of tackling corporate tax avoidance to raise revenue for public services, there are limits to what the ATO is able to do due to significant under resourcing. Despite a growing population and increased expectations from the community, ATO ongoing staffing levels have declined. Between 2013-14 and 2015-16, Average Staffing Levels at the ATO fell by over 4,000 or by nearly a quarter. The audit team, responsible for enforcing the tax compliance of individuals and multinational companies, was hit particularly hard by these job cuts. While there was an increase in the 2016-17 Budget, it has not reversed the significant cuts experienced over the last few years.

Given the need for more, not less revenue, these previous cuts seem illogical. According to information provided to Senate Estimates by senior ATO staff, the return on investment over the last decade would be between 1:1 and 6:1, or simply put every dollar invested in ATO staff generates between $1 and $6 in revenue.[1] Some had previously estimated that the cuts could lead to a loss of nearly $1 billion in revenue.[2]

This disconnect between public expectations that tax avoidance should be tackled and what the ATO can actually do must be addressed by the Government. It should commit to an increase in base funding and staffing for the ATO if it is serious about tackling corporate tax avoidance and increasing revenue.

It seems that while the Turnbull Government talks about an ideal egalitarian society where inequality no longer exists, behind the scenes it is nobbling one of the mechanism’s available to government to ensure that there is a level playing field for all those with only earned incomes as well as those with earned incomes plus accumulated wealth.                                      
So when Turnbull & Co announced in May this year that it intends introducing a strong Diverted Profits Tax and establishing a Tax Avoidance Taskforce in the Australian Taxation Office (ATO) one has to wonder if current staffing levels allow full investigation of multinationals operating in Australia or whether the taskforce (which has in fact existed since 2016) will be adequately resourced to look into multinational tax avoidance and the black economy as mooted.

One also has to wonder why in the face of widespread use of negative gearing of investment properties and capital gains tax arrangements to avoid paying an appropriate tax rate, the Turnbull Government also fails to reform the taxation system in these areas.

Oh, I forgot……………



NOTE

1. Table 1: 45th Parliament of the Commonwealth of Australia party representation

Source: Australian Electoral Commission (AEC), ‘2016 Federal Election Tally Room’

Thursday, 26 May 2016

Former Australian Treasurer Joe Hockey's 'gift' to all property owners across the nation



The Australian, 19 May 2016:
The current mess was created when former treasurer Joe Hockey caved into pressures to curb Chinese investment in Australian residential property in 2015. In the process, the treasurer was convinced by the Australian Taxation Office to widen the net to cover local residents.
Parliament was being bombarded with tax legislation at the time and the Canberra politicians did not pick up what the ATO had done.
So, fasten your seats belts for a horror commentary.
I was alerted to the position by one of Australia’s top commercial/tax barristers, John Fickling of WA. I am using many of Fickling’s words in describing what is about to happen.
If you purchase a property worth $2m or more on or after July 1 2016, you will be required to withhold 10 per cent of the purchase price and remit it to the ATO UNLESS the vendor is able to provide a special purpose tax resident’s “clearance certificate” from the ATO. It does not matter if the vendors were born in Australia and have lived all their lives in Australia — unless they have that clearance certificate, they are classed as a foreigner and the buyer must send 10 per cent of the purchase price to the tax office.
In case you think I’m kidding, read the ATO’s exact words: “A vendor who sells the following assets is also a relevant foreign resident, even if they are an Australian resident for other tax purposes.
The definition of property is very wide and includes leaseholds but does not include stock exchange investments. A purchaser who does not receive a “clearance certificate” from the vendor and does not send 10 per cent of the purchase price off to the ATO will still be liable to pay that 10 per cent to the ATO plus, almost certainly, will have to pay severe additional penalties and interest. The economics of buying the property will be severely damaged.
Fickling says all real estate agents selling $2m plus properties should be considering how this new regime will impact on their business and what will be the contractual consequences under the different scenarios that could play out.
For example, banks and other financiers may be affected where their secured debt exceeds 90 per cent of the value of the selling price. In a situation where the owner is being forced to sell, the banks will be better to take possession and sell themselves rather than being caught in the “tax clearance” delays.
To be fair, in the vast majority of cases local resident vendors will have no problem obtaining a “clearance certificate”.
However, for locals it might increase their risk of a tax audit and there are clear hazards for property sellers who:
Have not filed tax returns for many years;
Have filed tax returns, which would indicate they could not afford such a property;
Are selling their residential house at the same time as their neighbours to a single developer, which may give rise to a profit making scheme (such that the principal residence capital gains tax exemption may not apply to the value uplift generated by selling the properties together); or
Where the ATO has gathered information that indicates the vendor is in the business of developing property, which means that the principal residence capital gains tax exemption may not apply.
Fickling says in extreme cases action could potentially be taken by the ATO prior to the sale, to freeze the transaction.
Those who see any of the above as dangers might consider selling in a hurry (before July 1), so there might be some property bargains for buyers in coming weeks.
It’s also important to note that the $2m is “hard-coded” into the legislation, so, as property prices increase, more vendors will be caught. Over time, the ATO may shift their audit target identification processes to $2m-plus property vendors and away from other areas.
Additionally, if the vendor has a tax debt, the application for a “clearance certificate” may in some circumstances involve the ATO seeking to recover some or all of that tax debt from the purchaser by way of a garnishee notice.
At this point, it is worth noting that we are giving the Australian Taxation Office another weapon to recover tax legitimately owed and that is a good thing for society.
The great danger is the complexity created and that currently the tax office is badly run and is operating outside the law in key small business areas. It knows it can’t be challenged because of the cost of court cases.
Meanwhile, the legislation is yet another blow being aimed at Chinese and other Asian investors in property. These blows have come separately and each one has had reasonable motivations. But, in combination, they could inflict severe damage to the apartment and other parts of the residential property market.
Chinese and other Asian investors face a Hobson’s choice. They will not enjoy getting a tax clearance but nor will they appreciate the buyer of their property taking 10 per cent off the purchase price.
And if the tax office treats locals illegally, what might they do to foreigners?
Australia desperately needs greater independent supervision of the tax office.

In case readers imagine that high property prices are confined to large metropolitan areas a quick look at realestate.com.au will dispel that view – within the NSW Northern Rivers there are currently 7 properties in Yamba and environs with a sale value of $2 million and over, 4 in the Grafton area, 6 in Kyogle, 9 in the Lismore region, 35 in the Ballina district, 78 in the Byron Bay greater region and 46 in the Tweed local government area.

Thursday, 5 May 2016

The Turnbull Government and multinational tax avoidance


On 2 October 2014 the Australian Senate referred the matter of corporate tax avoidance and aggressive minimisation to the Economics References Committee for inquiry and report by the first sitting day of June 2015 and, after repeated extensions, on 2 May 2016 the Senate granted the committee a further extension to report by 30 September 2016. 

The committee’s interim reports clearly indicated that the Australian taxation system was being gamed by foreign-based multinationals using aggressive tax practices such as avoidance of permanent establishment, excessive debt loading, aggressive transfer pricing, and the use of tax havens.

On 11 December 2015 the C’wealth Multinational Anti-Avoidance Law (MAAL) came into effect and, its provisions applied from 1 January 2016 to corporations with global annual incomes of AU$1 billion and over and consolidated groups with a parent entity having a global annual income of AU$1 billion and over.

MAAL was designed to counter the erosion of the Australian tax base by multinational entities using artificial or contrived arrangements to avoid a taxable presence in Australia, adding to anti-tax avoidance measures already found in the Income Tax Assessment Act 1997.

However, less than three months later on 26 April 2016, the Australian Taxation Office (ATO) discovered that some taxpayers are entering into artificial and contrived arrangements to avoid the application of the MAAL.

On 3 May 2016 the Turnbull Government released a consultation paper on its proposed Diverted Profits Tax (DPT).

The DPT will impose a 40 per cent tax rate on corporations and consolidated groups with global annual incomes in excess of AU$1 billion that reduce the tax paid on the profits generated in Australia by more than 20 per cent by diverting those profits to low tax jurisdictions. The government hopes to have this new law in place by 1 July 2017.

According to the consultation paper both the Multinational Anti-Avoidance Law and the Diverted Profits Tax are based on Britain’s diverted profits tax introduced on 1 April 2015.

One can only hope that both these laws will be more effective than the U.K. law on which they are based. Because less than eight months after that law was introduced it was found to be ineffective in stopping large multinationals from diverting profits to low tax jurisdictions. As an example, Google with its U.K. advertising revenue held in low taxing Ireland had not had to make payments under the new diverted profits tax.

There is no way that multinationals operating in Australia will not mount legal challenges if the ATO attempts to impose penalties under provisions in MAAL and DPT

To some extent the loser will always be federal government revenue because, successful or otherwise, the corporate millions spent in legal fees fighting the tax man are apparently tax deductible.

Tuesday, 8 May 2012

Warning: Scamsters using the Tax Office to dud the unsuspecting


An email (copy below) currently doing the rounds and purporting to be from the Australian Tax Office is a scam. Avoid it like the plague.


Dear Australian Taxation Office customer,

After the last annual calculation of your fiscal activity we have determined that you are eligible to receive a tax refund of $250.50 AUD. Please submit the tax refund form and allow us 3-5 business days in order to process it.

A fund can be delayed for a variety of reasons. For example submitting invalid records or applying after the deadline.To access the form for your tax refund, please Click Here (link removed).


Thank you,
Australian Taxation Office Online Department.

Read the ATO's advice about scams here.

Tuesday, 6 September 2011

Watching the watchers in Australia



A 2008 US Embassy cable published by Wikileaks on 29 August 2011 states:

¶3. (C) Scott explained that Australia's Movement Alert List (MAL) has been updated to include not only those persons banned from entering or transiting Australian territory, but also all persons subject to asset freezing or whose travel is subject to reporting. 
An application for a visa by any person on the Movement Alert List triggered an alert to DFAT and/or other agencies responsible for taking action on the specific case. 
The system was as an effective mechanism to screen and prevent travel to Australia by persons of proliferation concern or who were subject to a travel ban, according to Scott. 
This included refusal of visas to Iranians on a regular basis.

According to the Australian Department of Immigration and Citizenship Movement Alert List fact sheet on 10 August 2010:

As at end of July 2010 there were approximately 630 000 identities of interest listed on MAL.
People may be listed on MAL when they have serious criminal records. Other people listed include those whose presence in Australia may constitute a risk to the Australian community and people who may not enter Australia as they are subject to exclusion periods prescribed by migration legislation. This can occur for a number of reasons, including health concerns, debts owed to the Commonwealth or other adverse immigration records.
About 1.8 million documents of concern are also recorded on MAL. These include reported lost, stolen or fraudulently altered travel documents.
Details of identities of concern are recorded on MAL as a result of the department's liaison with security, law enforcement agencies, other Australian Government departments and immigration officers in Australia and overseas.
If there is a MAL match a decision on entry is taken by the department in consultation with any other relevant agency.

Now aside from what seems like an incredible number of people being on the Australian Government’s watch and/or no fly data base, it would appear that if one owes a “debt to the Commonwealth” then the no fly provisions will possibly be activated.

Which may be of some concern to those Australians with large unpaid tax bills, those owing money due to cash transfer overpayments or having significant outstanding costs awarded against them in favour of a federal government agency; who probably were not expecting the Tax Office, Centrelink or the Attorney-General to be contributing to the Movement Alert List and now find their names side by side with those of suspected Al Qaeda sympathizers.

Given that Australian citizens already residing in the country are being placed on this list and, a second 2010 US Embassy cable indicates that information on these citizens when officially passed on to the US Government will possibly result in those named (after assessment by the Visas Viper committee) being placed on American no fly and/or selectee lists, one has to wonder exactly how many government departments are contributing names to the Australian Movement Alert List.

Thursday, 1 September 2011

North coast employer steals employees' superannuation


Warning to employees:
Check your payslips and contact your super fund

Sadly, yet another group of workers have discovered their boss hadn't been forwarding their superannuation to their super fund. The boss used the old trick of showing workers' super payments on their pay slips but then not forwarding those amounts to their super fund. Hmmmm, the ATO moves quickly to ensure taxation payments arrive promptly but (and this is speaking with first-hand experience) it doesn't give a flying fig about ensuring super payments are always sent. And the ATO does have that responsibility!

Today's Northern Star reports
Former staff of the We 'R' Kids childcare centre in Casino are furious their former employer had not paid their superannuation for up to five years.
In a further blow the workers appear to have lost all their entitlements.
Gathering in Casino yesterday to meet with employment advisers and others to consider their next move, the former staff said they were still in shock following the sudden closure of the centre on Friday. The centre was placed into liquidation with parent company, 888 Aust Investments Pty Ltd, racking up debts totalling hundreds of thousands of dollars.
Marlene Agresta was a former assistant at the centre who said although superannuation payments were reported on her pay slips, the funds had not been transferred to her superannuation fund since the company took over the business in 2006. She also said former staff were owed two weeks pay, which was due next Tuesday.
"We could have had two weeks pay to keep us going, but we didn't even get that - it's really slack," Mrs Agresta said.
Former employee Liz Parry said she had no idea what her next move would be, but said she would consider applying for a Centrelink payment until she found another job.
"But that is something I will leave as a last resort. I want to work, I am not the kind of person to sit around doing nothing," she said.
The whereabouts of former 888 Australia Investments Pty Ltd director James Zhang was unknown. Mr Zhang returned to China last year and has been virtually out of contact since.

Wednesday, 3 August 2011

More on identity theft - a warning about a so-called ATO website

A scam email doing the rounds again purports to be from the Australian Tax Office.

The email states:

"Subject: Please submit your tax refund
After the last annual calculation of your fiscal activity we have determined that you are eligible to receive a tax refund . Please submit the tax refund request and allow us 3-6 days in order to process it.
See your refund status by downloading attachment."

The email's attachment leads to a webpage that looks very much like an official ATO page, but it's not! The page seeks tax file numbers, date of birth and other personal details.

Details about the sender of the email are linked to the e address info@stout-associates.com