GST reviews to work deductions: Five takeaways for SMEs from ATO commissioner’s final speech

Outgoing Commissioner of Taxation Chris Jordan delivered a forthright address on Wednesday to round out his tenure at the Australian Taxation Office (ATO), covering the highlights and significant difficulties faced during his 11-year tenure.

The entire 70-minute address is available for viewing online, but SmartCompany has highlighted five of the key points for small businesses.

GST and ABN registrations

Almost everything about the $2 billion GST fraud wave was shocking, and Jordan’s speech, months after the ATO-led crackdown formally closed, included a few more surprises.

In response to around 57,000 Australians using their real names to register for an ABN, register for GST, and submit false BAS to earn a dodgy GST refund, Jordan said the ABN and GST registration process will become “slower and potentially more difficult”.

SmartCompany asked the ATO what this would mean for legitimate small business owners looking to register for GST.

The tax office is “undertaking record levels of compliance actions and by significantly strengthening our controls,” a spokesperson said.

“For example, we have strengthened upfront ABN and tax role registration controls to assist in preventing the registration of ineligible businesses, with our strategies driving a continuous reduction in these GST fraud attempts.”

A “range of appropriate consequences” exist for GST fraudsters, they added.

But what about innocent entrepreneurs trying to comply with tax rules?

The spokesperson said new review systems have been inserted into what was formerly a very quick online sign-up process:

Throughout Operation Protego we have strived to minimise any impact on legitimate businesses. To further protect legitimate businesses, we designed streamlined review mechanisms, even though we only received small numbers of requests for reviews.

A small number of small businesses may continue to see their registration applications not processed online or required to provide additional information for us to confirm their entitlement for ABN and/or GST registration.

In addition, we employ sophisticated machine learning models that utilise thousands of data points, scrutinising patterns, anomalies, and activities.

Fraud is everyone’s concern as we continue to face increasing and often sophisticated fraud attacks in a rapidly evolving environment.

We take our role in protecting our systems extremely seriously and will continue to explore ways to adapt and respond to these threats.

So: if you find your GST registration is taking longer than expected, or you get hit with an ATO review notice, there are around 57,000 people you can blame.

Workplace deductions

Jordan’s speech came just weeks after the Albanese government’s Stage 3 tax cut tweaks passed into law, reducing the tax break some of Australia’s top earners had hoped for.

Naturally, Jordan faced questioning from The Australian about the shape of Australia’s tax bracketing for top income earners — and politely declined to respond directly, saying it was a “capital ‘P’ policy issue” and therefore outside of his remit.

But the line of inquiry did allow Jordan to reference New Zealand, which cut its top marginal income tax rates while also ending the practice of deducting work-related expenses.

Doing the same in Australia would simplify the tax system for users, but it’d be “difficult” to implement for one crucial reason.

“Australians love their work-related expense deductions,” Jordan said. “They love them!”

During the address, Jordan also reflected on the success of the ATO app and its ability for workers to store and upload their work-related receipts come tax time.

“Our returns aren’t that difficult now,” he said.

“I don’t think that we should be focusing all on push deductions, push returns or standard deductions.”

Calls for investigation powers

Jordan, who served as a police officer before pursuing a corporate career, said the ATO is unique among its global counterparts because it does not have criminal investigative powers.

“This means we rely on others, such as the Australian Federal Police, to be able to do our job. Unfortunately, this also means we have to get in line with their priorities,” he said.

Hearing him speak, it’s clear he’d like to see that change.

“I would like to see more alignment with our counterparts across the world.

“The majority of revenue agencies including France, Germany, New Zealand, the UK and even our mates in the [United States Internal Revenue Service] with their staplers are authorised to obtain third-party documentary information and conduct searches to obtain necessary evidence.”

Reflecting on the increasingly complex and international fight against tax fraud, Jordan told reporters that extra investigatory powers could make it easier for the ATO to hunt down bad actors.

The ATO should not just be a “tax collector”, he said.

To illustrate his point, he referred to an operation between the Joint Chiefs of Global Tax Enforcement (J5), which includes tax evasion experts from Australia, the United Kingdom, the United States, Canada and the Netherlands.

… All those other four countries in the J5 have criminal investigation powers. We had this rather absurd situation where we had to take someone from the Australian Criminal Intelligence Commission in a meeting overseas in their secured facilities, and we couldn’t go in because we didn’t have those powers. So that’s why I’m calling for that. But it will be something into the future to disrupt the foreign facilitators of criminal activities.

Dormant debts under consideration

Late last year, taxpayers and their accountants were surprised by the ATO’s revival of long-dormant debts, some of which were as small as a few cents.

At the time, the ATO told SmartCompany that around 69,000 people had been contacted regarding debts which, until recently, had been considered uneconomical to pursue — that is, it would have cost the ATO more to chase the debts than they were worth.

The total value of those non-economical debts was $274 million.

Those debts would only be paid if the debtor accrued a refund through their next tax return.

Even so, The Guardian reported the resurrection of long-forgotten tax debts came as a shock to vulnerable taxpayers, and the ATO later apologised for “unnecessary distress” to those who received its notices.

Facing new questions from the outlet about those debts, Jordan said the ATO had for decades, effectively, put those debts on ice — until the Australian National Audit Office asked why the ATO was not pursuing those debts as part of its broader post-COVID collection strategy.

“As a regulator, we can’t purposely not conform with the law,” Jordan said, positioning the new debt collection strategy as adherence to regulatory guidelines.

“We have to. So, we’re working out way through, and we’ve ceased all of that correspondence — probably wasn’t the best example of a project to communicate to people.”

What happens now? Here’s Jordan on the status of that debt pile:

We’re in the process of looking at all of the alternatives. One is, going to the Minister of Finance [Stephen Jones] and saying ‘Can you write off these billions in debt, say, before 2017?’ Again, that sort of is unfair to people to did pay their debts before 2017. [But] That is one of the alternatives.

Self-managed super fund abuse

The ATO has long circled employer superannuation compliance as a priority, but Jordan’s speech laid out a new front in the war on dodgy super practices: self-managed super fund beneficiaries illegally dipping into their accounts.

“In 2020 over $380 million was illegally accessed from SMSFs and $255 million in 2021,” Jordan announced.

“This needs to stop. Super is for retirement. If people are experiencing genuine hardship, there are rules in place for when you can legally access super to help.”

Jordan will officially step down from the post at the end of the month, and all signs suggest SMSF compliance will be a key job for Rob Heferen, who will begin as Commissioner for Taxation in March.

You can view the speech, courtesy of the ABC, here: