To suppress tax dodging behaviour, the government is pushing hard at several initiatives at the federal, state and territorial levels. Last year, the Australian Tax Office (ATO) reported that about a third of large corporations did not pay tax for the 2020-2021 financial year. Despite this substantial difference, the ATO affirmed that there were high levels of compliance by entities and that the authority was taking decisive action on those that failed.
Even as some Australians express concern that the tax body is not doing enough to ensure large companies pay their fair share of tax, the ATO is assuring that this is not the case. Recent tax gap findings from the ATO indicate that large corporations have the least difference of 4.2%. Medium-sized businesses have a 7% difference, while small businesses had the greatest difference of 11.2%. The tax gap is the difference between the amount of tax that the ATO collects and what it estimates should be the correct tax amount collected if all taxpayers were fully compliant with tax laws.
One of the initiatives the government is pursuing to reduce tax avoidance includes the application of TA 2023/1. This addresses the issue of using interposed holding companies to avoid tax. The ATO is warning that there will be increased scrutiny of such arrangements, with serious penalties likely to apply to both taxpayers and tax agents promoting such schemes.
Meanwhile, the Victorian Building Authority (VBA) is putting building companies that have taken to shutting down to avoid debt payments on notice. Under the ATO-led Phoenix Taskforce, efforts are being made to identify and investigate such businesses that are suspected of engaging in illegal phoenix activity. Phoenixing involves winding up or abandoning companies to avoid paying debts and then setting up another company through which to carry on with the same business but without the debt obligation.
There is also some controversy over the delays in overhauling the Australian Securities and Investments Commission’s (ASIC) business registries. Dubbed the Modernising Business Register program, it was intended to merge over 30 ASIC-held business registries to create a single platform. This unification was aimed at providing the government with greater visibility over the business sector and reducing the problem of tax avoidance, phoenixing, and asset stripping.
The program was started over five years ago and has consumed over $1.5 billion so far without delivery. Financial Services Minister, Stephen Jones, has said that a $1 billion cost blowout could be attributed to the previous regime and that the Albanese government was making it a priority to complete the project, transparently and responsibly.
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