Tax by acronym – watch out for GST, CGT and FBT issues

Although the ATO released its 2012-13 Compliance Program a little while ago, it continues to regularly run tax issues up the flagpole to make sure taxpayers are aware of its concerns.

Forewarned is forearmed as they say. In this article, I look at a few of the latest “flagpole” issues:

Property developers

In 2012-13, the ATO has flagged an increasing focus on property developers who have a history of non-compliance with GST. The ATO says some developers claim input tax credits (ITCs) throughout the life of the development, but then avoid paying GST when they sell the property.

The ATO has adopted a new approach of identifying and engaging with these developers prior to sale of the development and as a result, it says it may contact developers when they register for GST and throughout the property lifecycle.

The ATO also continues to:

• Use third-party information to identify unreported property sales, particularly in the case of one-off property transactions.
• Seek to highlight discrepancies, before audit action.
• Identify incorrect application of the margin scheme provisions to reduce the GST payable on property sales.

Sales or long-term leases of commercial property, vacant land and new residential premises are taxable supplies where the supplier is registered for GST purposes and is making the supply in the course or furtherance of the enterprise that the supplier is carrying on.

The GST law provides suppliers with an alternative way of calculating the GST that is payable on a taxable supply which is either: (a) a sale of a freehold interest in land; (b) a sale of a strata unit; or (c) granting or selling a long-term lease.

The GST “margin scheme” allows the supplier to remit GST equal to 1/11th of the “margin” for the supply, rather than 1/11th of the whole consideration for the supply as would be required by the GST law. The scheme reduces GST payable, so the ATO is always keen to ensure that those who use these rules do so properly.

CGT small business concessions

How many times have I spoken about this issue – record keeping? It’s one of THE fundamental issues when considering tax compliance. The ATO has again stressed the importance of taxpayers keeping good records to determine if they are eligible to claim the CGT small business concessions. These concessions (while very beneficial to SMEs) are difficult enough to comply with at the best of times, but inadequate or incomplete records can mean an otherwise allowable claim might not get up.

Continued next page.