The ATO will usually communicate with the small business sector to let them know what the focus for their activities will be in the coming months. With that in mind, the Deputy ATO Commissioner Will Day presented at a recent Congress and outlined what the current hitlist is for the ATO. We have listed below the areas that the ATO will focus on in the coming months:
- Unpaid Tax Debts. With the outstanding unpaid tax debts spiraling out of control (now at over $54 billion, of which over $35 billion is from 2024), it was clear that ramping up efforts to collect these outstanding debts was going to be high on the priority list. We have seen this in our firm with payment arrangements becoming increasingly hard to negotiate with the ATO. The period over which payment arrangements can run is retracting, and the increased amounts that the ATO require upfront means that small to medium sized businesses are finding it hard to satisfy the more strict ATO requirements. We are also starting to see more Director Penalty Notices (DPN) which are being issued to bring some action to a head in relation to payment of outstanding tax liabilities. DPN require immediate action as, if no action is taken within 21 days of the date of the Notice, the directors of the company become personally liable for the debt. If you have outstanding tax debts expect that the ATO will be chasing you in the coming months.
- Division 7A issues. The ATO believe that shareholders and associates of companies are finding it hard to separate their private expenses from the business expenses of a company. Private expenses seem to be finding their way into company payments and the ATO are concerned how these payments are being treated within the company. These payments are effectively loans from the company to the shareholder and, if not treated correctly, or not declared as a dividend at the relevant time, can give rise to the ATO deeming them as dividends (which would be unfranked). Care needs to be taken as to what personal expenses or amounts are paid from a company, and if paid, how they are then treated.
- Non Commercial Losses. In 2022/2023 there was $4.5 billion in non commercial losses claimed by 232,000 taxpayers. The ATO is worried that taxpayers are misunderstanding the tax rules and making claims for “contrived” losses. There will be an effort made to educate taxpayers and to police these losses.
- Shadow Economy Operators. The ATO will be singling out operators in the shadow economy where there seems to be a major gap between the tax expected and the tax collected. In particular, it has been found that there are numerous rideshare operators who are not registering for GST and not remitting GST for the activities they conduct. This will be a major focus, and operators will be contacted from February onwards to review adherence to the tax laws.
The ATO have limited activity on a number of fronts in recent post COVID years. This is changing and taxpayers can expect the ATO to ramp up activity in adherence to the tax laws as well as the collection of past tax debts.
If you have any concerns in relation to your affairs, or any past taxes outstanding, please discuss with your client manager to determine a way forward.
Author: Michael Goodrick
*Correct as of 29 November 2024
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
