Property transactions to face increased ATO scrutiny in 2012-13
By Larry Schlesinger
Thursday, 19 July 2012
Small businesses that dispose of property, foreign owners of Australian
property, individual tax payer with property investments and property
developers will all face increased scrutiny from the Australian Tax Office
(ATO) in the forthcoming financial year. Details of a crackdown on how property transactions are reported for tax
purposes have been revealed in the ATO's Compliance program for 2012-13,
which highlights "particular issues" that will attract the attention of the
taxman with a warning that it will "deal firmly with those who intentionally
seek to obtain advantage over their competitors through the inappropriate
use of the tax and superannuation systems". "The annual compliance program outlines the actions we are taking to deter,
detect and deal with those who do not meet their tax and superannuation
responsibilities," says Bruce Quigley second commissioner of compliance at
the ATO. Individual taxpayers Along with the standard focus on incorrect or fraudulent refunds, those with
property holdings should take note that ATO's forthcoming compliance program
will focus on those who omit "income, including dividends and interest,
capital gains and foreign source income". In addition, the ATO will continue to match third-party information with tax
returns to identify the omission or understatement of capital gains on real
property and share transactions. "We will conduct reviews where we suspect taxpayers may have incorrectly
reported capital gains or losses." Small business owners (SMEs): The ATO warns that it will "continue to monitor and investigate taxpayers
who dispose of real property and fail to report the transaction on their
activity statement or misclassify the transaction for GST purposes" "We will match information from third party sources (such as sales data from
state and territory revenue offices) with information reported on activity
statements," says the ATO. As part of its compliance program the ATO plans to conduct around 700
reviews and audits to "address GST risks associated with the sale, transfer
and acquisition of real property, particularly in relation to the reporting
of property sales and the incorrect application of the margin scheme
provisions to reduce the GST payable on property sales". Foreign investors The ATO will also look closely at transactions involving taxable Australian
property by foreign residents, who must report and are subject to capital
gains tax on any such transactions. It says it will focus on "valuation outcomes designed to fail the principal
asset test in relation to the disposal of indirect interests in Australian
real property, as well as arrangements that seek to circumvent the
non-portfolio interest test - including the use of non-share equity as part
consideration for foreign resident acquisitions". The ATO says it increasingly receives information from overseas, "such as
details of employment-related foreign source income". "We also see a continuing compliance risk arising from the sale of taxable
Australian property by foreign residents and the claiming of exemptions,"
says the ATO. Property developers In relation to GST and property transactions, the ATO says it will increase
its focus on property developers with a history of non-compliance. "By engaging with taxpayers at registration and throughout the property
lifecycle, we will encourage them to correctly assess and report their
liabilities and, where necessary, require them to provide security bonds
against projected future tax liabilities," says the ATO. The ATO highlights that it has a strong relationship with the states and
territories in developing and supporting its complementary compliance
programs. As an example it says it received a referral from the Northern Territory
Revenue Office that initiated a series of audits on property developers
"disengaging from the tax system and thus evading payment of income tax and
GST on property sales". This information resulted in revenue of around $5 million being collected
with potential compliance impacts for these developers in relation to state
stamp duty and land tax. Other ATO property compliance activities expanding and improving the use of third party information to identify
unreported sales, particularly in the case of one-off property transactions
working with taxpayers and their tax agents to alert them to discrepancies
before audit action
identifying incorrect application of the margin scheme provisions to reduce
the GST payable on property sales
undertaking approximately 1,000 reviews and audits
providing greater certainty for taxpayers on the treatment of transactions
associated with commercial residential premises through the publication of
the final commercial residential ruling in August 2012.
A copy of the full compliance program can be downloaded on the ATO website.
Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253 Confidential email:- The information in this message is intended for the
recipient name on this email. If you are not the recipient please do not
read, copy distribute or act upon the message as the information it contains
may be privileged. If you have received this message in error, please
notify the writer by return email. Thank you very much for your assistance
in this matter and your co-operation.
By Larry Schlesinger
Thursday, 19 July 2012
Small businesses that dispose of property, foreign owners of Australian
property, individual tax payer with property investments and property
developers will all face increased scrutiny from the Australian Tax Office
(ATO) in the forthcoming financial year. Details of a crackdown on how property transactions are reported for tax
purposes have been revealed in the ATO's Compliance program for 2012-13,
which highlights "particular issues" that will attract the attention of the
taxman with a warning that it will "deal firmly with those who intentionally
seek to obtain advantage over their competitors through the inappropriate
use of the tax and superannuation systems". "The annual compliance program outlines the actions we are taking to deter,
detect and deal with those who do not meet their tax and superannuation
responsibilities," says Bruce Quigley second commissioner of compliance at
the ATO. Individual taxpayers Along with the standard focus on incorrect or fraudulent refunds, those with
property holdings should take note that ATO's forthcoming compliance program
will focus on those who omit "income, including dividends and interest,
capital gains and foreign source income". In addition, the ATO will continue to match third-party information with tax
returns to identify the omission or understatement of capital gains on real
property and share transactions. "We will conduct reviews where we suspect taxpayers may have incorrectly
reported capital gains or losses." Small business owners (SMEs): The ATO warns that it will "continue to monitor and investigate taxpayers
who dispose of real property and fail to report the transaction on their
activity statement or misclassify the transaction for GST purposes" "We will match information from third party sources (such as sales data from
state and territory revenue offices) with information reported on activity
statements," says the ATO. As part of its compliance program the ATO plans to conduct around 700
reviews and audits to "address GST risks associated with the sale, transfer
and acquisition of real property, particularly in relation to the reporting
of property sales and the incorrect application of the margin scheme
provisions to reduce the GST payable on property sales". Foreign investors The ATO will also look closely at transactions involving taxable Australian
property by foreign residents, who must report and are subject to capital
gains tax on any such transactions. It says it will focus on "valuation outcomes designed to fail the principal
asset test in relation to the disposal of indirect interests in Australian
real property, as well as arrangements that seek to circumvent the
non-portfolio interest test - including the use of non-share equity as part
consideration for foreign resident acquisitions". The ATO says it increasingly receives information from overseas, "such as
details of employment-related foreign source income". "We also see a continuing compliance risk arising from the sale of taxable
Australian property by foreign residents and the claiming of exemptions,"
says the ATO. Property developers In relation to GST and property transactions, the ATO says it will increase
its focus on property developers with a history of non-compliance. "By engaging with taxpayers at registration and throughout the property
lifecycle, we will encourage them to correctly assess and report their
liabilities and, where necessary, require them to provide security bonds
against projected future tax liabilities," says the ATO. The ATO highlights that it has a strong relationship with the states and
territories in developing and supporting its complementary compliance
programs. As an example it says it received a referral from the Northern Territory
Revenue Office that initiated a series of audits on property developers
"disengaging from the tax system and thus evading payment of income tax and
GST on property sales". This information resulted in revenue of around $5 million being collected
with potential compliance impacts for these developers in relation to state
stamp duty and land tax. Other ATO property compliance activities expanding and improving the use of third party information to identify
unreported sales, particularly in the case of one-off property transactions
working with taxpayers and their tax agents to alert them to discrepancies
before audit action
identifying incorrect application of the margin scheme provisions to reduce
the GST payable on property sales
undertaking approximately 1,000 reviews and audits
providing greater certainty for taxpayers on the treatment of transactions
associated with commercial residential premises through the publication of
the final commercial residential ruling in August 2012.
A copy of the full compliance program can be downloaded on the ATO website.
Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253 Confidential email:- The information in this message is intended for the
recipient name on this email. If you are not the recipient please do not
read, copy distribute or act upon the message as the information it contains
may be privileged. If you have received this message in error, please
notify the writer by return email. Thank you very much for your assistance
in this matter and your co-operation.
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