Media release 2008/14
Tax Commissioner Michael D’Ascenzo today reminded wealthy Australians that, irrespective of the business and tax advice they receive, they are responsible for their own tax affairs.
Mr D’Ascenzo issued the reminder with the release of a new booklet for people who effectively control $30 million or more in net wealth, Wealthy and wise.
“Wealthy and wise provides a series of questions taxpayers should ask themselves and their advisers to ensure they are in the low tax risk category – which is where most taxpayers want to be,” Mr D’Ascenzo said.
“For example, if the Tax Office was to review you and your group, are you confident you have the necessary records to support and explain your tax position? Do all of your entities serve a commercial purpose?
“These types of questions will keep advisers on their toes and help prevent wealthy Australians from getting into a non-compliant tax situation which is costly and can cause serious damage to their reputation.
“In a tax system based on voluntary compliance, helping people comply and making it as easy as possible for them to do so, are just as important as dealing firmly with non compliance.”
Wealthy and wise gives wealthy people the tools to ensure they get their tax right. Those who deliberately attempt to evade tax risk penalties, interest, back taxes or prosecution.
The chance of getting caught is high and getting higher.
Mr D’Ascenzo said the high wealth individuals (HWI) taskforce will undertake 200 risk reviews and start 40 audits during this financial year – up from 22 audits last year which raised an additional $280 million in revenue.
“Since the taskforce was established in 1996 additional revenue of $1.7 billion has been collected and losses of $1.7 billion disallowed,” Mr D’Ascenzo said.
“At 29 February 2008, the taskforce had raised assessments totalling $171.3 million and collected $115.9 million from audit activities for this financial year.
“We have increased the number of people in the HWI taskforce to 181 and enhanced our data matching to substantially improve our profiling and risk assessment of wealthy individuals.”
The new booklet explains what’s likely to grab the Tax Office’s attention, including:
- discrepancies between lifestyle and reported income
- significant variations in tax payments
- unexplained losses, and
- offshore dealings.
A copy of the booklet, Wealthy and wise: a tax guide for Australia's wealthiest people is available on the Tax Office website.
Wealthy and wise: a guide to managing your taxation obligations
Summary of key points
Introduction:
p4 A high wealth individual (HWI) is defined by the Tax Office as an Australian resident who, together with associates, effectively controls $30 million or more in net wealth.
p5 We have identified around 1,200 HWIs associated with approximately 25,000 entities.
p7 In May 2006 the government provided additional funding for HWI compliance work which is being used to:
- greatly increase staffing in our HWI taskforce
- increase compliance activities
- streamline and automate our risk identification and assessment procedures
- develop more sophisticated economic and analytical tools to identify and profile wealthy Australians, and
- improve the quality and efficiency of our risk assessments and audits
Meeting tax obligations:
p12 We suggest people:
- make an effort to understand the tax consequences of material issues
- ensure valuations are undertaken in good faith and stand up to scrutiny
- become aware of potential problem areas in relation to their tax affairs
- ensure advisers act within the law, and
- seek clarification when there is doubt about the application of the law
p16 From 2006 – 2010, the HWI Taskforce will almost triple in size. Together with improvements in technology, this means that the likelihood of a wealthy person’s tax affairs being reviewed will increase substantially.
What attracts our attention:
p19 The features and characteristics which will attract our attention include:
- tax performance that varies substantially from business performance
- significant variations in tax payments that are inconsistent with economic indicators
- unexplained losses
- a history of aggressive tax planning by individuals or their adviser
- tax outcomes that are inconsistent with the intent of newer law
- discrepancies between lifestyle and reported income
- private assets treated as business assets
- non-disclosure or lack of transparency in offshore dealings, especially involving tax havens, banking secrecy and low tax jurisdictions
- distortions and inconsistencies in market valuations
How we conduct risk reviews and audits:
p27 We are not resourced to review all taxpayers, so we take a risk management approach to compliance. We scan the population using general and specific risk filters to identify and quantify risk and then prioritise the risk.
Our products and processes:
p45 We encourage people to advise us of any changes in their position or any errors in their tax affairs as soon as they are detected. If we are notified of tax shortfall before we notify someone of an audit, any penalty is reduced by 80%.
If a disclosure is made after we notify someone of an audit the penalty is reduced by 20%, except where the disclosure relates to an issue outside the scope of the audit, in which case the penalty is reduced by 80%.
How we help you comply:
p50 We offer a range of services to help wealthy individuals understand and manage their tax affairs, including:
- access to a tax officer in the HWI taskforce or our advice area.
- the Tax Office business portal
- a tailored homepage on our website for wealthy individuals (currently under development)
- the Wealthy and wise booklet, our annual report and compliance program, and
- providing information through industry groups and consultative forums.
p51 We also provide other forms of written advice including:
- public rulings
- class rulings
- product rulings
- private binding rulings, and
- administratively-binding advice.
Last Modified: Monday, 7 April 2008
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