ATO requires top 1000 companies to report 'contestable' issues

By on
The Central Business District is seen from the air on a sunny winter afternoon in Sydney August 24, 2013.
The Central Business District is seen from the air on a sunny winter afternoon in Sydney August 24, 2013. Reuters/Daniel Munoz

The Australian Taxation Office is allegedly requiring all of Australia’s top 1000 companies to report tax issues it could see as "contestable.” It has also lifted the stakes for those that lodge late or incorrect information.

If successful, experts warned that the policy could be extended to smaller businesses and even to individual taxpayers. The companies involved turn over $250 million or more.

The Australian reports that it has been shown emails the tax office recently sent to chief financial officers. The emails, which reportedly discuss the escalation of disclosure obligations, demand companies to reveal their “reportable tax positions.” They need to do so despite a possibility that their position will be upheld.

Furthermore, the ATO stated that companies are now required to report a tax issue “where it would be concluded in the circumstances that what is argued for is about as likely to be correct as incorrect.” Big businesses proven to have made false claims will allegedly face fines of more than $500,000.

The new requirements set by the ATO have caused alarm to senior financial officers at big companies. An unnamed chief financial officer said it was “catch-22.”

For BDO senior tax partner Tony Sloan, ATO’s latest measures are a “radical development.” He recognised it as the biggest single move away from self-assessment by the tax office in decades.

“Until now, there have only been a handful of our very largest companies who have had to do this,” he said, adding it was a serious escalation to extend it to the top 1000 companies. Before the recent move, he said the reportable tax position schedule was introduced to several huge companies in the past years.

“It will be itching to lower the bar even further in the next couple of years, so that maybe the top 5000 companies can be caught, not just the top 1000,” The Australian quotes him as saying. He explained that the tax office only had to drop the turnover threshold a bit more, and even small business will be caught in the dragnet.

Sloan added there is nothing that could stop individuals from being hovered up in the long term as well. Furthermore, he believes the move is part of a bigger plan to help fill the revenue hole at the end of the mining boom.

Fox Business/YouTube