A10.1The following is extracted from the Tax compliance for small-to-medium enterprises and wealthy individuals guide available on ato.gov.au.
Several characteristics may attract our attention, including:
- tax performance varying substantially from business performance
- inconsistencies in activity statements or spikes in refund claims
- large, one-off or unusual transactions
- tax and economic performance varying significantly from similar businesses in the same industry
- unexplained losses
- a history of aggressive tax planning by individuals or their advisors
- weaknesses in compliance structures, processes and approaches
- tax outcomes inconsistent with the intent of tax law
- lifestyle not supported by after-tax income
- treating private assets as business assets
- accessing business assets for tax-free private use
- not disclosing offshore dealings with overseas entities, especially low-tax jurisdictions and tax havens that allow banking secrecy
- using complex structures and intra-group transactions to minimise tax
- transactions where the tax and economic outcomes are inconsistent
- poor governance and risk-management systems
- distortions and inconsistencies in market valuations and apportionments
- business performance falling outside small business benchmarks (for businesses with turnover of up to $15 million).
We take these characteristics into account when developing our view of potential risks and determining our compliance approach.