In a presentation at the Australian Mining and Energy Conference, Commissioner of Taxation Michael D’Ascenzo said these businesses could expect to be subjected to some level of risk analysis.
“With the increased funding we received from government in the last budget, we are planning to profile all of these taxpayers in the next 12 months,” he said.
“Higher risk businesses will be subject to a range of compliance activities, such as risk reviews and audits.
“With risk profiling, we closely examine major transactions and business results to look for inconsistencies between tax, economic and financial outcomes.”
He also revealed the ATO was cottoning on to some of the evasive manoeuvres of the bigger players.
“We are seeing instances where multinational enterprises are restructuring their activities to shift certain functions, assets and risks to lower tax jurisdictions,” he said.
“The restructuring cases encountered to date have typically involved the permanent shifting of annual business profits in the tens to hundreds of millions of dollars.
“These trends bring transfer pricing risks into sharp focus and it is an area where we are increasing our attention.
“Transactions that are directed towards achieving substantial tax benefits and are not reasonably replicated in real-world commercial markets will also attract greater scrutiny from the ATO.”
D’Ascenzo said there were some common reporting errors around the Goods and Services Tax, attributable to the limitations of companies’ business systems.
He said typical risks included joint venture reporting errors where product sales were reported by the joint venture operator instead of the joint venture participants; JVO claiming input tax credits that relate to creditable acquisitions of the JVP; and supplies between the JVO and JVP being incorrectly treated for GST purposes.
“Issues also arise with inter-group transactions where the incorrect entity reports and claims GST credits.”
GST issues also pop up in accommodation.
“Many mining companies operating in remote locations supply residential housing for their employees, and a few have incorrectly claimed income tax credits in respect of costs associated with the residential housing supplied.
“There have also been a few companies to claim input tax credits on the construction of buildings which are later used for rental purposes.”
D’Ascenzo encouraged proactive interaction with the ATO, especially for large joint venture developments, such as the upcoming Gorgon liquefied natural gas project on Barrow Island.
“With projects such as Gorgon, a range of joint tax administration issues may arise over the life of the project: income tax, petroleum resource rent tax, fuel tax credits and withholding tax, to name a few.
“We believe that consultation and collaboration at the project level, as well as at the individual joint venture participant level, will be a more efficient way to provide tax certainty in relation to the project.
“Accordingly, we are actively involved in working with the relevant players to identify and address tax issues as they are emerging.”
To foster greater participation with the resources industry, ATO is piloting the Lead Relationship Manager service with eight large companies.
“The intent of this program is to provide better coordination and to cut to the chase so as to reduce compliance costs.
“The pilot has been extended to next April at the participants’ request in order to fully explore the potential of the program and how it can best operate in practice.
“So far the feedback we have received from businesses that are part of our pilot program has been generally positive, with businesses saying the program can help resolve irritants.”
The Australian Mining and Energy Conference was held on Friday at the Gold Coast by CPA Australia.
