Whilst the October Budget is tax light when it comes to initiatives around individuals and small business, accountants will be busy both dealing with ATO audits and the Tax Practitioners Board (TPB). 

Taxation of multinationals may have attracted the attention on Budget night, with around $1 billion expected to be raised over the forward estimates, however over $5 billion is expected to be raised from increased funding of Australian Taxation Office (ATO) audit activities over the forward estimates.  

Tax Avoidance Taskforce 

The Tax Avoidance Taskforce will raise $2.8 billion of revenue over the next four years.  This Taskforce has raised $22.9 billion in tax liabilities and collected $12.7 billion in cash between 2016 and 2021.  Both funding and the operational period of the Taskforce have been bolstered – with the ATO receiving an extra $200 million per year, and an extension to 1 July 2025.  

Members with clients in the top 1,000 public companies or top 5,000 high wealth private groups that control net wealth of $50 million or more, can expect to receive a lot more attention from the ATO particularly in relation to international and trust transactions. 

With this area emphasising the need for good tax governance to gain justified trust, there will be a lot of work generated in explaining business decisions to the ATO.  

Shadow economy program 

$2.1 billion is to be raised from the shadow economy programs, with an extension of three years from 1 July 2023 to 2026.  The ATO’s tax gap analysis indicates that small business is the main source of shadow economy activity.  Members with small businesses are likely to be busy as the ATO increases its use of data analytics in relation to audits.  

Shadow economy initiatives also include the expansion and better reporting of taxable payments reporting system and the proposed sharing economy reporting regime which has been delayed a year.  

Personal income tax compliance program

The personal income tax compliance program has been extended by two years, from 1 July 2023 to 2025. Key areas of non-compliance such as overclaiming of deductions and incorrect reporting of income will be targeted. ATO activity will be a combination of proactive, preventative and corrective (audit) activity.

Tax Practitioners Board

The TPB has been allocated four years of funding to “increase compliance investigations into high-risk tax practitioners and unregistered preparers.”  New risk engines will be used to help identify tax practitioners who provide poor or unlawful advice. By raising industry standards, $82 million of revenue is expected to be generated.  

Announced but unenacted measures

Tax is complex enough without there being a swathe of announced but unenacted measures (ABUMs).  When there is so much economic uncertainty, clearing the decks of a large raft of ABUMs would make life that little bit easier.  

For those of us who were hoping for clarification, we will have to wait a bit longer. The Budget announced that it would not proceed with eight measures and that it would defer the start date of another three measures. This leaves the status of most ABUMs unresolved.  

Matters that will no longer proceed include:

• 2013-4 MYEFO debt/equity rules change
• 2016-7 budget TOFA changes
• 2016-7 budget taxation of asset-based financing arrangements
• 2016-7 budget new framework for limited partnership collective investment vehicles
• 2018-9 budget audit requirements for SMSFs
• 2018-9 Budget $10,000 cash limit
• 2018-9 Budget standardized metrics for product disclosures
• 2021-2 Budget DGR for pastoral care

Small businesses and their advisers are still waiting to see what will happen in relation to Division 7A tax changes that were originally announced in the 2016-17 Federal Budget. Corporates are waiting to see what will happen to patent boxes and digital games offset.  

The status of the Board of Tax’s proposals regarding the residency of companies and individual are also unclear.