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GSTCompliance
ATO GST Compliance Program
GST registration integrity check
BAS non-lodgement
Refund integrity
Cash economy
Transitionalissues
Random sample
ATO GST Compliance Products
GSTCompliance Verification Centre
Specificchecks
BAS review
Comprehensive audit
BASLodgement Dates / / Newfurn Floor Coverings Ltd. ABN 63 004 650 668
22-24 Manningham Road West, Bulleen Vic 3105
Phone (03) 9850 9311 Fax (03) 9850 9499

GST & You February 2002

We are pleased to provide you with the February 2002 edition of GST & You. This edition alerts you to the following important GST developments:
  • The Tax Office has signalled an increase in GST compliance activity. Read our summary of the main areas they will be focusing on.
  • Have you been contacted by the Tax Office for a compliance review? Understand the different levels of review that the Tax Office engages in.
If we can help you with your GST and/or BAS queries, please don’t hesitate to contact us.
Good Selling!!
Felix Lai
Group Manager Finance

GST Compliance

Be prepared, because the Tax Office (ATO) will substantially increase its activity in terms of taxpayer compliance verification now that the federal election has been and gone. Therefore, this month we explore the tools used by the ATO in its compliance program and outline the ATO’s key areas of focus.
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ATO GST Compliance Program

Eighty per cent of ATO staff will be focused on compliance verification action, with the balance maintaining an advisory or help capacity. The ATO made this announcement in its publication ‘The Tax Agent’, outlining its position on GST compliance.
The major areas of focus in conducting verification action will be:
GST registration integrity check
The ATO is focusing its efforts on entities that have mistakenly registered for GST or have ceased their enterprise.
Although the ATO has stated that it is conducting the project in an effort to reduce taxpayer costs, entities found not to be carrying on an enterprise may be fined up to $2,200 for not cancelling their GST registration.
Should your circumstances have changed and you or any related entities no longer require GST, PAYG or FBT registration, please contact your accountant for assistance.
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BAS non-lodgement
The ATO will have a program that deals with entities that have outstanding Business Activity Statements (BASs). Please ensure your entity has lodged all BASs with the ATO.
Refund integrity
The ATO will continue to carry out checks in relation to GST refunds. Such verification is usually conducted via telephone, and/or an ATO visit to your premises. Such a verification check consists of ATO requests for documents (usually tax invoices) relating to particular transactions resulting in the refund position. Much of the ATO’s focus in this regard has been concentrated on entities seeking large value refunds.
Cash economy
Entities operating in traditional cash-based industries can expect above average ATO scrutiny.
More specifically, the ATO has stated that it intends to place a strong emphasis on the construction industry. In conducting this type of verification the ATO places significance on information it receives directly from the public, including ‘dob-ins’.
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Transitional issues
Even though the GST system has been in operation for over 18 months, the ATO will continue to monitor transitional issues, especially where a perceived risk is apparent.
This area of verification will involve ATO field officers examining contracts entered into before 1st July 2000, input tax credit claims in relation to motor vehicle purchases, sales tax credit claims and any associated rebates or product returns and property contracts.
In many instances, taxpayers are either not accounting for GST when required or are claiming input tax credits to which they are not entitled. These entities are subsequently having penalties imposed.
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Random sample
The ATO will, as required by its agreement with the States and Territories, conduct compliance checks on a random sample of businesses.

ATO GST Compliance Products

Should you be contacted by the ATO or given notification of a compliance check it is strongly advised that, firstly, you seek your accountant’s representation at the review and, secondly, actively assist in the review.
The ATO has developed a number of compliance ‘products’ designed to enable its staff to verify differing levels of compliance risk.
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GST Compliance Verification Centre (‘CVC’)
CVC staff make contact with taxpayers or their tax agent via telephone. The aim of such contact is to clarify BAS amounts stated and/or request copies of supporting documentation to be provided to substantiate amounts stated. The CVC has a particular focus on refund integrity (as discussed earlier).
CVC compliance checks normally take 20 minutes to an hour to complete.
Specific checks
Specific checks are conducted around one or two labels on a BAS or series of BASs (such as G1, G2 or G3 and 1A), or one or two issues identified through non-BAS intelligence.
These checks aim to assess an entity’s accounting system to see if it can effectively and accurately compile a BAS. The check focuses on the entity’s accounting practices and traces transactions through to the BAS and other supporting documentation such as tax invoices. The process allows for simple errors detected through the check to be corrected at the initial interview. Any issues requiring further attention may be addressed by elevating the case to a BAS review.
Specific checks take one to two hours to complete.
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BAS review
The BAS review is a more comprehensive review than a specific check, focusing on all GST information reported in a BAS, with some limited examination of non-GST items.
Generally, this form of review will require closer inspection of financial records and will take more time to conduct.
BAS reviews take three to four hours to complete.
Comprehensive audit
As the name suggests, a comprehensive audit will incorporate a full review of a GST year and will use income tax data to help conduct the audit.
The use of income tax data creates a danger that income disclosed in an income tax return does not correlate with GST liabilities returned via your BASs (i.e. approximately 10% of income).
Similarly, input tax credits claimed may not correlate with income tax deductions. Such a situation may arise where your accountant does not complete your activity statements, but completes your income tax return, as accountants will often make adjustments to your accounting data to correct errors, align expenses with income tax deductibility, or for tax planning purposes.
Therefore, it is imperative that you seek a GST review for all your entities on a regular basis.
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BAS Lodgement Dates

As you may be aware, the lodgement date for the December 2001 quarter BAS is 28 February 2002. This four-week extension to lodge has been granted in consideration of the Christmas and New Year holiday period.
It must be noted that the extension only applies for the December quarter for entities who report GST on a quarterly basis. Entities who report GST on a monthly basis must still lodge on the 21st day of the following month. The lodgement date for the March 2002 quarter BAS is 28 April 2002, as per the usual lodgement program.
Important: This is not advice. Members should not act solely on the basis of the material contained in this Newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Newsletter is issued as a helpful guide to members and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.