Business

ATO benchmarks trap little guy

TAX TIME: The Australian Taxation Office’s rules and regulations reportedly makes Australian tax the most complex system in the world, and can cause small business owners quite a few headaches.
TAX TIME: The Australian Taxation Office’s rules and regulations reportedly makes Australian tax the most complex system in the world, and can cause small business owners quite a few headaches. File

WHEN I studied tax law in the late 60s or early 70s, it was the old 1936 Act as amended and was at most three-quarters of an inch thick.

A night's reading!

Now, I'm told it's 13,000 pages long - and that doesn't include the case law, ATO determinations, ATO warnings, ATO ruminations and various other examples of ATO verbal diarrhoea.

It's now reputedly the most complex in the world. And it's getting worse.

I have been known to describe it as a cut and paste job, a patch job on legislation that is seldom drafted well enough to enforce its initial goal.

The result is a complex mish-mash of draconian laws, varied and/or qualified by sub-texts whose intention is to stop leakage by people cleverer than the public servants charged with drafting the stuff.

My senior staff each year attend a seminar conducted by the National Tax and Accountants' Association.

It gives us an insight into what the legislators and the ATO heavy hitters are getting up to.

The days when ATO auditors got off their ergonomic chairs and actually wandered the streets looking for the signs of tax avoidance are over.

We are in the "matching" era, the era of cross-referencing. Here's a couple of things affecting businesses that you and your accountant may be unaware of.

The ATO has a long, long history of trying to kill the cash economy, the situation where businesses do not declare their true income.

The trend now is that they assess businesses' declared income against what is called the "industry benchmark" and arbitrarily issue an amended assessment to those who fall outside, challenging the business to prove that their declared income was correct. The worrying thing for business is that the courts are supporting the ATO's approach.

Their argument is that the tax system is a self-assessment system so the onus of proof falls on the taxpayer; if the taxpayer declares a certain income, he should have the paperwork to support its credibility.

My firm has software that tells us whether a business is in peril of failing the ATO benchmarking test. Forewarned is forearmed, while I'm in the mood for clichés.

Crooks do not have my sympathy and I encourage the ATO to chuck the book at them.

The problem is that innocent people who don't conform with what the ATO sees as sacrosanct benchmarks will have to spend valuable time defending themselves against what really boils down to nebulous numbers.

Another example of the ATO using its huge data resources to trap taxpayers is their accessing loan applications.

You guessed it, if you declared a certain level of income in a loan application and that is not matched in your tax returns, you have every right to be concerned.

The ATO is issuing amended assessments which reflect what you told the financier and I'm sure the courts will support them on the same basis - that our tax system is a self-assessment system.

We had a recent experience in our Caboolture office where a small business client was audited. Rather naively I thought, the auditor went about matching bankings with her records which, in this case was a simple cashbook. Why naively? Because true ripper-offerers are never going to bank their ill-gotten gains.

The system really is all about trapping the small players. History shows that they are much more likely to surrender than the big guys with access to highly expensive accountants and lawyers.

Topics:  ato, bob lamont, opinion, taxes, tax time




Smelter worker of 40 years still loves the job as he did day one

Boyne Smelter general manager Joe Rea, with long service award winners Don and wife Norma McKerchar and Bill with wife Bev Miskin, and operational manager Kerry Moran.

IF YOU asked Bill if safety was worth it, he'd say “you bet it is"

New church to open in Calliope, February

BIGGER AND BETTER: Lifestyle Church, which opened in Gladstone 10 years ago yesterday, celebrated their Milestone by announcing the church is expanding to Calliope in February. Pictured: Gabby Curro, 12. and Erica El-Khori, 11.Photo Mike Richards / The Observer

LIFESTYLE Church are expanding to Calliope

Fishing industry squeezed out by new 60% target

THE fishing industry is casting its eye over the State Government’s green paper on fisheries management reform.

FISHING industry casting eye over State Government's green paper

Latest deals and offers

Pop icon and former Neighbours star buys into Byron

Singer Natalie Imbruglia. Supplied by Sony Music Australia.

Former actor turned pop singer joins Byron celebrity rush.

MASTERCHEF: Coast cooks to dominate finals

SO CLOSE: MasterChef's final four, from left, Matt Sinclair, Elise Franciskovic, Harry Foster and Elena Duggan. Elise’s elimination means now only the three Sunshine Coast contestants remain in the competition.

MasterChef finals will be mandatory viewing in three Coast homes

The best and worst bits of Splendour from our experts

The Amphitheatre received Flume with open arms and danced to his music on Sunday night.

The good, the bad and the plain weird

Elise's emotional exit from MasterChef quarter finals

MasterChef Australia Top 4 contestant Elise Franciskovic.

CAIRNS cook struggles after receiving letter from fiance.

Reno stars want tradies to focus a little more on one thing

The Demmrichs want Tradies to look after their most important tool

Fashionistas show off at Splendour in the Grass

Amberly Nelson, from Melbourne, posts for a photo with friends at Splendour in the Grass.

GLITTER, skin and mesh were all on show at festival this weekend.

You can own this Queensland town for just $1

Yelarbon

Unprecedented auction of town's business centre with no reserve

Work starts on $15M Caloundra apartment building

Turning the first sod at the Aqua View Apartments site in Kings Beach are (from left) husband-and-wife developers Alex Yuan and Stella Sun with construction company Tomkins director Mike Tomkins and Councillor Tim Dwyer.

Developers excited about addition to Kings Beach skyline

72-year-old Coast developer set to start new project

GREEN LIGHT: The Cosmopolitan has been approved for development at Cotton Tree.

Meet the Canberran set to deliver another chapter for Coast suburb

Plans revealed for 1500-lot 'master-planned community'

Precinct will be bounded by Boundary St and Shoesmith Rd

Ecco Ripley sales run sparks prime release

MOVING IN: Sekisui House has announced the release of more residential blocks at Ecco Ripley.

Sekisui House is preparing to unveil more land at Ecco Ripley

The climb is slow but property on the way up

Michael Matusik, director of Matusik Property Insights.Photo Allan Reinikka / The Morning Bulletin

The improvement would be mild when compared to past cycles