INVESTORS are in the tax spotlight after the global financial crisis triggered a tough stand by the Australian Taxation Office, with more audits of investment returns this year.
The increased compliance is because the financial downturn is expected to prompt some investors under financial pressure to try to avoid paying their full tax whack, ATO commissioner Michael D'Ascenzo says.
"The economic downturn has created a very different and highly volatile risk environment," he says.
"As a result, we are seeing a greater community need for help in meeting day-to-day tax obligations and a climate in which some taxpayers may be more aggressive in seeking to avoid or evade their tax and superannuation obligations."
Other countries have already reported increased compliance risks, while evidence from economic downturns in Australia also reveals an increase in attempts to avoid tax, he says.
Key sectors the ATO will focus on include individual investors, micro-businesses and self-managed super funds.
There are about 4.7 million individual taxpayers who receive investment income. Capital gains and losses, managed investment schemes, dodgy tax schemes and superannuation funds are all under increased scrutiny this year.
"One of the likely impacts of the economic downturn is that there will be an increasing number of people claiming losses on sale of investments," D'Ascenzo says. "We will write to people who bought investment properties, shares or units in a managed fund last financial year to inform them of capital gains tax obligations."
Other audit triggers will include investment products that feature bringing forward deductions for financing costs and interest pre-payments; non-arm's length financing, non-recourse loans and uncommercial interest rates and periods; and excessive franking credits.
Super contributions and withdrawals are also in the firing line.
The ATO is on the lookout for dodgy withdrawal schemes and those exceeding limits on contributions.
"The risk of illegal early release of super is likely to increase as promoters of illegal release schemes target individuals with pressing debts, resulting from the economic down turn," D'Ascenzo says.
"Our response includes freezing bank accounts, raising income tax assessments with penalties against those who withdraw their benefits early and referring promoters for prosecution."
The ATO expects to crossmatch more than 400 million financial transactions against tax returns this year.
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