As a result of this, businesses are cutting staff, reining in their accounts receivables and lengthening their creditor payment terms to ease the cashflow until things are back to normal.

The governments of the world are also experiencing the GFC in the same way. After all, a government is essentially a national not-for-profit business with tax income as its revenue and budget spending as its expenses.

So, as business profits fall and unemployment rises, the tax base that the government receives its income from decreases accordingly. On the flip side, its expenses will rise as unemployment benefit payments increase and greater government spending is needed to boost the economy.

The recent trend of governments cracking down on tax evasion and offshore tax havens is the government’s way of protecting its tax base from being eroded.

The ATO has been operating two very successful programs (Project Wickenby & Offshore Voluntary Disclosure Initiative) which have actually turned a profit for the government.

The Australian Labor Party recently released a media statement on its website from Assistant Treasurer, Nick Sherry boasting of the success of these programs.

These two programs are the carrot & the stick of the ATO against tax evasion and offshore tax havens.

PROJECT WICKENBY

Tax revenue generated:  $440m

Operating costs: $211m

NET PROFIT: $189m (as at Oct 2009)

Note:

With such a fantastic ROI for the government, it is not surprise that the program have been extended to 2012-13 with an increased budget of $430m.

Offshore Voluntary Disclosure Initiative

Tax revenue generated: $50m

Operating costs: Unknown but may be negligible due to the voluntary disclosure nature of the program. ie Tax amnesty

Perspective

When you take into account that $16 BILLION DOLLARS was sent offshore in 2008, these tax collections are only the tip of the iceberg.

Or from a business point-of-view, imagine having a potential market worth $16bn..! And, your company (ie. ATO) is the only one with the power to recoup it.

How much would YOU spend to get a piece of that pie? I bet plenty…!

Cheers,

Taxabull Team

You can follow us on twitter: twitter.com/austax

News stories relating to this topic

news.com.au – Business

news.com.au – PerthNOW

Yahoo!7 – Finance

The previous crackdown in 2008 was for “luxury” car sales over $57,000. In that case, a whooping 70% of investigations yielded a tax liability for the ATO. A very good return on investment, indeed..! 

So, no surprise that its now chasing after the “middle-class”.

WHO DOES IT AFFECT?

1. Employers who have provided their employees with car benefits. 

Any benefit provided to your employees outside of wages & salaries is subject to the Fringe Benefits Tax (FBT) rules. 

The ATO will be catching out any employers who have not been declaring FBT on car benefits to employees.

2.  Persons who appear to be living beyond their financial means. 

If you declare a taxable income of only $10,000 but buys a car worth $30,000, then that’s suss…!

The ATO will be investigating you to see whether or not you have been paid in cash and not declaring it.

3. Persons who buy and sells cars regularly for profit. 

There is a strong distinction between “car enthusiasts” & “car dealers”. Its the ol’  hobby vs. business argument. It’s commonsense at the end of the day. 

If you are turning over 50 cars a year, you may be classified as a business..!! The ATO will be looking at classifying those profits as undeclared capital gains on sale.

If you fall under any of the above, it might be a good idea to see a tax accountant to suss out potential liabilities, etc.