ATO finds $8.7 billion tax shortfall

THE Australian Tax Office (ATO) estimates individual Australians are collectively underpaying their taxes by $8.7 billion, and will take measures to close the gap.

Last week, the ATO published its calculation of the difference between the tax the ATO collects and the amount that would have been collected if all of these taxpayers fully complied with the law.

There are about 9.6 million individuals not in business, and more than 93 per cent of income tax received from them is paid voluntarily or with little intervention from the ATO.

However, the estimated net tax gap for individuals not in business in 2014-15 is about 6.4 per cent, or $8.7 billion.

This is primarily driven by incorrectly claimed work-related expenses, such as claiming deductions where there is no connection to income, claims for private expenses, or no records to show that an expense was incurred.

ATO deputy commissioner Alison Lendon said seven out of 10 returns randomly selected for review had one or more errors.

“What we have seen is that most people make small, but avoidable, errors so we will ramp up our assistance to help these people understand their obligations and get things right.

“But we are also asking people to take just a little extra care with what they claim, because all of those little amounts add up.

“A smaller number of people are deliberately doing the wrong thing – that has a significant impact on revenue. These people can expect closer attention from us, especially this tax time.”

The ATO says it will increasingly use data and technology to identify outliers, as well as to tailor advice and guidance products, auto correct mistakes, streamline reporting and substantiation processes, access third party data to verify claims and provide pre-fill information in tax returns.”

Ms Lendon said the ATO received extra funding in the 2018 budget, which would be used to not only make lodging returns simpler but also ramp up the ATO’s focus on higher-risk behaviours such as repeated and intentional non-compliance, fraud and deliberately taking positions contrary to law.

The net income tax gap for large corporates was estimated at 5.8 per cent or $2.5 billion in 2014-15, the most recent published gap.