ATO concerned about small business asset write-off scams, documents reveal

Concerns about illegitimate businesses rorting the federal government’s $20,000 asset write-off for small businesses have been revealed in internal staff documents from the Australian Tax Office.

The concerns came to light after a document, titled ‘Response form to new policy alert’, was made public following a Freedom of Information request by the ABC.

The document, which is dated after the scheme was announced in the May budget, reportedly contains warnings from ATO staff that the $20,000 instant asset write-off would lead to an increase in tax claims from small businesses and therefore make it more difficult to detect fraudulent activity.

The document also stated “fraudsters will take advantage of this more complicated environment … to commit fraud by trying to look like legitimate businesses taking advantage of this initiative”.

However, a spokesperson for the ATO told SmartCompany this morning the tax office does not anticipate an increase in fraudulent claims as a result of the policy.

“We have published guidance around the instant asset write-off, noting that we will work with small businesses looking to use the immediate deduction to ensure they are appropriately claiming it and that we will be monitoring claims and following-up high risk cases,” the spokesperson says

The spokesperson says the ATO deployed a “range of sophisticated techniques to identify and stop fraud, including monitoring activity statements for sham or false claims”.

“We are always on high alert for fraudulent activities. If small businesses exhibit behaviours that indicate a high level of risk, they can expect a higher level of interaction with the ATO,” says the spokesperson.

CPA Australia head of policy Paul Drum told SmartCompany he had seen the internal document and from what he could tell, it was a part of what he believed to be part of a “normal, organisational, enquiring response”.

“I’ve seen it but to me it seems it’s a typical response from the tax office,” Drum says.

“As a new government-announced measure, they’ve considered it and thought what could happen.”

Drum says he doesn’t believe there is an enormous risk of businesses rorting the scheme, but it was good to see the revenue authority alert to possible risks.

“They’re the experts in checking things,” he says.

But Drum says small business should be aware the tax office was on the lookout for possible rorts.

“This confirms that the tax office have flagged this as an area where there could be rorting,” he says.

Council of Small Business of Australia executive director Peter Strong told SmartCompany he is also not too fussed by the ATO reaction, likening it to a “classical response you’d probably give to anything”.

Strong says red flags would be expected go up at the tax office pretty quickly if an illegitimate business tried to claim the asset write-off.

 “If someone gets an ABN and thinks they’re going to get it, it’s a pretty simple formula, they’ll say you’re not a business,” he says.

“I think this would be a much more difficult thing to rort.”