Property developers and the construction industry throughout Australia have emerged as key players in the taxman’s sights.
The tax office says it will continue efforts to stamp out fraudulent phoenix activity and enforce sweeping new provisions relating to contractor payments.
In its Compliance in Focus: 2013-14, the Australian Taxation Office describes phoenix activity – fraudulent activity whereby directors of companies try to avoid paying PAYG withholding tax, income tax, GST and superannuation liabilities by placing the company into liquidation, transferring the assets into a new company and continuing to trade while leaving liabilities in the old company without sufficient assets to pay them – as being ‘widespread’ among the property and construction industries.
The ATO says it has identified more than 2,000 property developers who have placed companies into liquidation on multiple occasions (a strong indicator of phoenix activity), and that it plans to conduct 150 reviews and audits as part of its efforts to stamp out the practice.
“The most serious cases will be prosecuted,” the ATO says. “We will also be increasing the use of legal collection processes against phoenix company directors, including director penalties.”
The ATO will also focus on a new system for reporting payments in the construction industry in a bid to crack down on the ‘cash economy.’
As of July 1 last year, businesses operating in building and construction have been required to report the total amount of payments they make to each contractor for services relating to building projects over the course of a year.
The tax office says the new system will help to stamp out non-lodgement of tax returns or under-reporting of income and GST requirements as contractors who understand that their income is being reported are less likely to engage in under-reporting.
The office adds that it has expended considerable effort educating businesses about their reporting requirements in this area.
Reporting started this month and covers payments made in 2012/13.