In: Accounting
Describe (350 words) four expectations the ATO has of taxpayers? with explanation of each of the four expectations .
The ATO expects taxpayers to comply with the tax laws. That’s fine as a general proposition, but in many instances, that’s a whole lot easier said than done. Believe it or not, the ATO does understand that the tax laws are complex and is constantly releasing materials to help taxpayers, including SMEs, understand how those laws apply to them.
It outlines the ATO’s approach to managing tax compliance risks for SMEs and wealthy individuals, and explains the behaviours they can expect from the ATO in its dealings with them. It also outlines the ATO’s expectations of those taxpayers and informs SME market taxpayers of their key rights and obligations. The new publication is available on the ATO website.
Among other things, the ATO expects taxpayers to establish sound risk-management processes. This includes asking questions when receiving tax planning advice.
If an SME uses an adviser, the ATO suggests they ask whether their advice is likely to result in significant amounts of unpaid tax, or in taking a position that is not reasonably arguable (there are tests in the law that determine whether this is so).
The ATO also suggests that SMEs obtain advice commensurate with the complexity of their business dealings. In all cases, the ATO suggests that taxpayers:
The ATO uses a Risk Differentiation Framework (RDF) to assess the level of risk each taxpayer presents. The RDF is split into four risk categories, from lower-risk taxpayers and medium-risk taxpayers through to key taxpayers and higher-risk taxpayers. It allows the ATO to determine the amount of resources and the responsive activities required for each category.
The four risk categories from the RDF are as follows:
Higher-risk taxpayers – The ATO says it categorises “a relatively small number of taxpayers as higher risk”. ATO activities may include audits and other intensive approaches to deter non-compliant behaviours.