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ATO to recommence programs to tackle shadow economy

While the ATO will continue to focus on implementing government stimulus measures, including those announced in the federal budget, it will shortly recommence its work to address key risks to the tax and super system.

ATO to recommence programs to tackle shadow economy
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  • Maja Garaca Djurdjevic
  • November 02, 2020
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The Australian Taxation Office has announced it will be resuming its review and audit programs addressing shadow economy behaviour.

While the Tax Office will remain focused on helping the small business community, it will also refocus its efforts on maintaining the integrity of the system throughout the crisis, and in the aftermath.

“We will be continuing our use of Taxable Payments Reporting system data to check that contractors in a range of industries are lodging and meeting their income tax and GST obligations in full,” said Deborah Jenkins, deputy commissioner of small business.

“Taxable payments annual reports (TPAR) data allows us to match the payments reported by payers to contractors (payees) income tax returns to identify where contractors may have omitted income.

“We have also been piloting a nudge approach where we have contacted some contractors ahead of their 2020 tax return lodgement to remind them to include their TPRS reported income this year.”

Moreover, from November 2020, the ATO will be contacting tax agents and their clients who are contractors in the cleaning, courier, and building and construction industries and may not have included all of their income in their 2019 tax return.

“We will be using a combination of emails and phone calls to contact tax agents in advance of their clients receiving letters,” said Ms Jenkins.

In regard to the ATO’s shadow economy program more broadly, she revealed that some strategies are being reconsidering as some of the previous approaches, like visiting businesses in person, are unlikely to be possible in the coming year. 

“We will continue to use a combination of review and audit programs, delivering help and education and building community awareness of our work to address the shadow economy – we will just need to do things a little differently,” said Ms Jenkins.

“We are also applying agent-focused strategies to the black economy by taking the insights generated through our tax practitioner model and identifying agents with higher than normal levels of black economy risk in their client base.

Other areas the ATO will be closely monitoring are loss claims and unreported fund extractions from small business companies.

“We are currently overhauling our GST high risk refund models to enable us to more effectively detect and action high risk refunds before payment,” Ms Jenkins concluded.

“Our broad focus now beyond the specific risks we are focused on is ensuring people are staying in the system. Businesses need to be lodging, and if they can pay, they should. Those who still need help just need to contact us and we will be here to support them. But we are conscious that many businesses are doing well so we need to be reminding them to meet their obligations.”

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