Tax compliance crackdown

In an effort to combat non-compliance and tax evasion, the Government has announced an extension of the personal tax and shadow economy compliance programs along with an extension to the tax avoidance taskforce.

Shadow Economy Compliance Program and Tax Avoidance Taskforce

The Government will extend the Tax Avoidance Task Force and the Shadow Economy Compliance Program for two years from 1 July 2026. These initiatives will receive an additional $200 million in funding each year. The extension of the Shadow Economy Compliance Program focuses on combating shadow economy activities, safeguarding revenue and preventing non-compliant businesses from gaining an unfair advantage. Extending the Taskforce ensures the ATO remains well-equipped to address critical tax avoidance risks, particularly amongst multinationals, large businesses, and high net wealth individuals. This extension is estimated to increase receipts by $4.3 billion and increase payments by $1.8 billion over the five years from 2023-24.

Income Tax Compliance Program

The Government will extend the ATO Personal Income Tax Compliance Program for one year, starting from July 2027. This extension allows the ATO to address non-compliance issues, including overclaimed deductions, incorrect income reporting, and undue tax agent influence. The Program will also focus on emerging risks related to short-term rental property deductions. During the next five years, this measure is expected to increase receipts by $180.3 million and payments by $44.3 million.

Countering fraud

This year’s budget has allocated an additional $187 million over four years to strengthen the ATO’s ability to detect, prevent and mitigate fraud against the tax and superannuation systems. The majority of these funds will be used for upgrading the ATO’s information and communications systems to improve the ability to identify and block suspicious activity along with implementing a new taskforce to recover lost revenue.

In addition, the Government intends to enhance the ATO’s ability to combat fraud by extending the ATO’s mandatory notification period for BAS refund retention from 14 days to 30 days to align with time limits for non-BAS refunds.

BDO comment

Fraudulent manipulation of the tax system should not be tolerated, and BDO supports the additional funding allocated to the various ATO defence taskforces. In the digital age, the ATO will need to ensure it remains up to date with advanced data-matching to safeguard against another mass scam similar to the TikTok GST scam of 2023, under which it is speculated the ATO lost $2 billion.  

Taxpayers doing the right thing will also be affected by these announcements. It appears that dealing with the ATO is simply a cost of doing business in Australia.