How the ATO detects and deals with those who don’t do the right thing
The Australian Tax Office has access to a wide range of government and private databases to cross check information. For example they can access bank account information, Centrelink and also Super fund activity. The ATO uses various sources of information and undertake 'a range of compliance activities' to detect and deal with organisations not meeting their tax and super obligations.
Of course if the ATO is collecting the right amount of tax, and ensuring people and organisations are not avoiding their tax responsibilities, then there is less of a tax burden on the rest of us.
The ATO also receive information about tax avoidance from the community and from other agencies (including agencies of states and territories).
- You can Report fraud, tax evasion or a tax planning scheme if you have any concerns about a nonprofit organisation which you think may be carrying out fraud or tax evasion.
What attracts the attention of the ATO
There are certain behaviours and activities that alert the ATO to possible abuse of the tax and super systems.
Private ancillary funds
- Late lodgement of annual return
- Related party transactions
- Non-compliance with the regulatory guidelines.
Charities and deducible gift recipients
- Not applying income and assets solely for the purpose for which the organisation is established... for example to provide private benefits to individuals
- Making incorrect claims for franking credit refunds
- Incorrectly advertising that donations to an organisation are tax deductible when the organisation is not endorsed as a deductible gift recipient.
Self-assessing income tax exempt non-profits
- Incorrectly self–assessing income tax exempt status
- Not meeting the requirements of an exempt category.
Fringe benefits tax (FBT)
- Incorrectly claiming FBT rebates and exemptions that don’t meet the requirements of the law
Taxable non-profit entities
- Incorrectly classifying member and non-member income and expenses which may result in an understatement of assessable income
The ATO has a range of powers for dealing with instances of non-compliance. These include:
- providing advice, education and support
- requiring your organisation to provide us with additional information
- undertaking a review or audit
- revoking your entitlement to tax concessions
- raising tax liabilities, applying interest to unpaid liabilities and imposing administrative penalties.
To learn more about what nonprofits can do to review their status and check their tax returns and Income Activity Statements, and to make a Voluntary Disclosure if you have made a mistake or left something out, visit these sites...