ATO chases big business in tax sweep
It has also announced it will open hundreds of reviews into rich Australians and small companies with offshore accounts in tax havens or low-tax jurisdictions such as Singapore.
The push comes as the OECD plans to launch a suite of new international tax rules at the G20 meeting of finance ministers in Moscow on Friday, in the latest effort to plug loopholes and shore up government revenues.
The ATO unveiled its key focus areas as part of its annual compliance strategy for 2013-14. The strategy includes 250 reviews and 70 audits of large or multinational businesses operating in Australia, of which at least half relate to suspected profit shifting.
The strategy also includes 680 reviews and 115 audits of individuals and small enterprises suspected of using secrecy jurisdictions to avoid tax.
Second Commissioner Bruce Quigley said profit shifting remained a key focus for the Tax Office due to it being one of the greatest threats to the country's tax base. Large businesses (with an annual turnover of $250 million or more) contribute 68 per cent of Australia's corporate and superannuation fund tax.
"Because of the size of these transactions and the size of the companies we are looking at, it's of big consequence for the revenue of Australia," Mr Quigley said. "It's globally the No.1 issue that revenue authorities are dealing with."
Trusts will also face scrutiny, with a new taskforce homing in on companies exploiting a perceived weakness in trust law for financial gain.
Australia has followed other governments, including Britain, the US and France in scrutinising the corporate structures of large multinationals. Earlier this month, it launched a taskforce to establish the purpose of Australian businesses in low-tax jurisdictions.
The focus on wealthy individuals follows the leaking of personal tax records to the International Consortium of Investigative Journalists in Washington last year. It also reflects information obtained by the Tax Office more recently through co-operation with other jurisdictions.
"In our conversations with other countries, we are identifying more Australians linked to entities set up offshore," Mr Quigley said.
The Tax Institute's Robert Jeremenko said scrutiny of common corporate structures, such as trusts, required clearer explanations of the law.
In 2012-13, the ATO raised $2.19 billion in unpaid taxes after conducting audits of 519 large businesses.
Tax office targets
■ Multinationals
■ Rich Australians
■ Trusts
■ Tax havens
Frequently Asked Questions about this Article…
The ATO is ramping up its offensive on corporate tax dodging by launching a record program of reviews and audits targeting large and multinational businesses suspected of shifting profits offshore. Its 2013–14 compliance strategy makes profit shifting a key focus alongside scrutiny of trusts, wealthy individuals and companies linked to low‑tax jurisdictions.
The ATO’s 2013–14 strategy includes about 250 reviews and 70 audits of large or multinational businesses (with at least half focused on suspected profit shifting), plus about 680 reviews and 115 audits of individuals and small enterprises suspected of using secrecy jurisdictions to avoid tax.
The ATO treats businesses with annual turnover of $250 million or more as large. These businesses are a priority because they contribute around 68% of Australia’s corporate and superannuation fund tax, so profit shifting by large firms has major consequences for government revenue.
The ATO is reviewing entities linked to secrecy jurisdictions and low‑tax locations — the article specifically mentions examples such as Singapore — and more broadly refers to tax havens and low‑tax jurisdictions used to shift profits or hide accounts.
Yes. The ATO has set up a new taskforce to scrutinise trusts and is opening hundreds of reviews into rich Australians and small companies with offshore accounts. That increased focus follows leaked personal tax records and growing international cooperation identifying Australians linked to offshore entities.
The ATO’s push aligns with wider international efforts: the OECD planned a suite of new international tax rules to be launched at a G20 finance ministers’ meeting in Moscow, aimed at plugging loopholes and strengthening revenue protection globally.
In 2012–13 the ATO raised $2.19 billion in unpaid taxes after auditing 519 large businesses, demonstrating the material revenue outcomes that can result from focused compliance activity.
Investors should pay attention to company disclosures about tax risk, uncertain tax positions, and use of offshore structures or trusts. The Tax Institute has warned that scrutiny of common corporate structures requires clearer explanations of the law, so look for transparent reporting on tax arrangements and any material tax contingencies.
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