Tax & ATO News Australia

New Powers For ATO

I'm sure by now you have seen the recent press releases by the Tax Commissioner and the Assistant Treasurer announcing the Government's intention to provide the Commissioner with a statutory remedial power that will allow for resolution of certain unforeseen or unintended outcomes in taxation and superannuation law. If not, here is the original media release by the office of the Assistant Treasurer;

The Government is committed to providing more certainty and better outcomes for taxpayers and reducing the regulatory burden on individuals, business and community organisations. The complexity of Australia’s tax law, combined with evolving business practices, has increasingly led to unintended outcomes. Even though the Commissioner of Taxation endeavours to interpret the law to give effect to its purpose or object, there are instances where this is not possible.

To address this, the Government will provide the Commissioner with a statutory remedial power to allow for a more timely resolution of certain unforeseen or unintended outcomes in the taxation and superannuation law.This will allow the Commissioner to make a disallowable legislative instrument that will have the effect of modifying the operation of the taxation and superannuation law to ensure the law can be administered to achieve its purpose or object.

There are similar legislative instruments making powers in Commonwealth law currently granted to the Australian Prudential Regulation Authority (APRA) and also the Australian Securities and Investments Commission (ASIC). The power will be appropriately limited in its application and will only apply to the extent that it has a beneficial outcome for taxpayers. It will only be available where the modification is not inconsistent with the purpose or object of the law and has no more than a negligible revenue impact. The Commissioner will consult publicly prior to any exercise of the power. This power provides a mechanism to deal with some aspects of complexity in the tax law, and provides more certainty and better outcomes for taxpayers. Josh Frydenberg, Assistant Treasurer.

My perspective on this announcement of new powers for the ATO, and the intention to correct any deficiencies in taxation and superannuation law, is that the law is complex, as we all know, and quite often unintended loopholes operate against taxpayers.

I have been involved in a number of cases, particularly involving superannuation, where it was clear that no mischief was done, but the tax law punished the taxpayer anyway. In most of those cases, the ATO has told me that they would love to help, but their hands are tied because the legislation won’t let them assist. In all cases we worked our way through it, but it was messy and took more time than it should have.

This new legislation will give the ATO power to correct those kind of unintended consequences where the legislation falls down. There are safeguards, thankfully, which require the ATO to only exercise its power to the benefit of taxpayers.

There will be legal purists who will quibble about providing the ATO with powers to make laws, even when those laws are beneficial to taxpayers, as arguable breaching the doctrine of separation of powers between the executive and the legislative arms of government. Overall, however, I think this is a sensible approach and as long as it is closely watched, should only be beneficial to taxpayers. 

Posted in: Tax & ATO News Australia at 04 May 15

Inspector-General of Taxation releases report into ATO's use of benchmarking to target the cash economy

On 4 October 2012, the Assistant Treasurer, David Bradbury, released the Inspector-General of Taxation's report on its review into the ATO’s use of benchmarking to target the cash economy.

This report was made following consultation with stakeholders. Whilst the stakeholders were generally supportive of the ATO using benchmarks to exclude large numbers of likely compliant taxpayers from compliance activities, they were concerned that that the ATO’s benchmark-based compliance activities captured many compliant taxpayers resulting in unnecessary stress, extra compliance costs and time away from their businesses. The report found that the ATO had made adjustments in only 24% of the 7670 benchmark audit cases, meaning that 5830 taxpayers had been wrongly accused.

Overall the report made 11 recommendations to improve the use of benchmarks by the ATO. Although the ATO agreed with nine recommendations, I am concerned that the ATO only partially agreed with two. One of these recommendations was that the ATO agree to publish more information about how it develops and uses its benchmarks. However, the ATO has refused to publish geographical comparisons of benchmarks. The other recommendation was better record-keeping and the accurate reporting of income so that the overall costs for small business are minimised.
 

Posted in: Tax & ATO News Australia at 26 October 12