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ATO’s GST Compliance Focus

At a recent conference, the ATO Deputy Commissioner, Hector Thompson, outlined the key ATO focus areas in the GST space. It was noted that while the GST system is in relatively good shape in Australia with a gap of 3.6%, which is much lower than many OECD countries (eg EU VAT gap was estimated to be 10.3% in 2022 with some other nations as high as 34%), the system needs to evolve to ensure it remains sustainable.

One of the ATO’s key focus areas in 2023-24 is to improve small business tax performance by digitising small business taxation and integrating the tax and super system into the operating environment of small businesses to reduce the instances of fraud. In conjunction with this, the ATO has also designed new analytical data-driven risk models that utilise statistics and algorithms to look for patterns and relationships on data, as well as machine learning to stay in control of rapid evolution in GST fraud behaviour.

In addition to catching GST fraud in those already in the system, the ATO notes it is continuing to work closely with the ABR as a preventative. Both agencies coordinate strategies to disrupt potential fraudulent registrations in the ABN system, particularly for phantom businesses. Going forward, the ATO will be taking a proactive approach to the registration of ABNs and will request businesses contact them to initiate a review where there is a question around the entitlement to an ABN.

For the 2023-24 year, the ATO will also implement a targeted industry strategy in relation to privately owned high wealth groups focusing on retail, construction, and retirement village industries. Given that the retail and construction industries are the two most significant industries for GST activity and have arguably experienced the most disruption during the COVID-19 pandemic and the aftermath, this focus will come as no surprise.

Specifically for the retail sector, the ATO has concerns that some retailers’ controls and governance have not shifted in line with changes to an online retailing model, variations in sales volume, product classifications and intragroup transactions. It will also continue to crack down on the use of illegal electronic suppression tools used to mask, understate, or delete the transactions at the point of sale.

In terms of the retirement village industry, the ATO acknowledges that the sector presents unique challenges to GST. To facilitate compliance of the sector, the ATO is currently undertaking a broad review of the issues impacting the sector to develop a greater understanding of industry operating models. It is hoped this will identify opportunities to provide comprehensive and fit-for-purpose guidance to the sector.

The ATO hopes that this targeted approach will allow it to understand the distinctive issues facing each industry and pinpoint areas or risk to develop tailored approaches to ensure entities within particular industries are paying the correct amount of GST. This approach will also allow for the early detection of risky behaviour and the application of appropriate treatment.

Businesses in all sectors are reminded to remit GST in a timely manner as the ATO has seen an increase in GST debt with businesses reporting but not remitting GST. In fact, according to figures, collectable GST debt has more than doubled in the three years to $12.3bn as at 30 June 2022.

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