Amongst the Budget announcements last night was the unveiling of the most significant changes to GST since its introduction by former PM John Howard in 2000.
The Federal Government is cracking down on GST fraud amid a raft of tax changes for Australian business, with the ATO receiving an extra $337.5 million in funding over four years to improve GST compliance and collect $2.7 billion in revenue.
David Wilson, a Tax Partner with top five accounting firm BDO, said GST changes announced in the Budget represented the most significant changes to the GST regime since it was introduced by the Howard Government in 2000.
Mr Wilson said the tax office would seek to identify fraudulent GST refunds, systematic under-reporting of GST liabilities, non-lodgement of GST returns, and non-payment of GST debts.
“It’s clear the ATO believes many businesses are deliberately or inadvertently avoiding their GST responsibilities. While it is believed it is not a big problem at the top end of town, small to medium-size businesses will become the focus of a program designed to crack down on GST fraud. This will certainly worry a few of the less compliant businesses out there,” he said.
Mr Wilson said the crackdown would also collect an additional $1.74 billion over four years in non-GST taxation.
“Part of the extra funds for the ATO includes $6.5 million in capital funding for the equipment and resources to store and analyse data collected from external agencies,” Mr Wilson said. “That means the ATO will review data from other agencies and departments to uncover GST fraud, and it expects this data matching will uncover $1.74 billion in other tax avoidance or underpayments.”
Mr Wilson said that the three most complex and problematic areas of GST (financial supplies, margin scheme and cross-border supplies) would all undergo material changes.
The material changes consist of:
- Revamping the cross-border transactions rules by implementing the recommendations of the Board of Taxation Review’s report, lodged in February, which amongst other things, no longer requires all non-residents to register for Australian GST
- Restructuring the margin scheme provisions to clarify and simplify the rules and ensure greater certainty for taxpayers on issues surrounding the use of valuations when selling properties that are part of a business
- Increasing the threshold above which businesses need to interact with the financial supply provisions, from $50,000 to $150,000 of input tax credits, delivering compliance savings
- Protecting the GST base by reducing opportunities for businesses to inappropriately take advantage of the reduced input tax credit concessions by bundling services
- Allowing small businesses accounting for GST on a cash basis to claim input tax credits up front in relation to hire purchase arrangements
Mr Wilson cut through the politics of the announcement and pointed out the change for what it is, a renewed focus on audit activity to net the Government additional tax revenue.
“Importantly, the increased funding being allocated to the ATO under the banner of ‘working together to improve voluntary compliance’ should be recognised for what it is: an increased ATO focus on GST audit activity.” Mr Wilson said.