The Australian Taxation Office (“ATO”) has broad ranging and far reaching powers under the various taxation and administration legislation to request and obtain information. Commonly, the exercise of these powers are classified as formal, or informal.
In the Not-For-Profit (NFP) Sector, the ATO has adopted an education first approach in the belief that a greater awareness by clubs of tax obligations will lead to greater compliance, although the ATO acknowledges that the NFP Sector is substantially compliant. Nevertheless, the ATO continues an active compliance program. Quite rightly, the ATO seeks to ensure that clubs are treated equally under the legislation, and that the appropriate amount of tax is collected.
The ATO undertakes compliance activity around many issues which include assessment and confirmation of income tax exempt status, mutuality calculations, FBT calculations, GST calculations, employee tax and superannuation obligations.
The most frequent request for information will be by letter which will detail the information sought and the timeframe by which to respond. If the request for information is too general, the timeframe unreasonable, or the club is unsure of what is being requested, the club should consider obtaining advice from its lawyers or accountants. It should then write to the ATO clarifying the request. The club should respond reasonably promptly and, above all, in a professional and courteous manner. Experience indicates there is little to be gained from aggressive posturing at the outset.
Generally the ATO will advise the club if it is the subject of an audit or ATO officers intend to visit the club.
The ATO does publish on its website (www.ato.gov.au) guides and fact sheets on many topics which include, for example, the “Taxpayers Charter: If You’re Subject To Review or Audit”, Voluntary Disclosures and GST Audits and Reviews. They are all useful publications.
Also, the Commissioner publishes an annual Compliance Program, which, in general terms, sets out the ATO’s strategic direction for compliance activities. The Compliance Program has a section devoted to NFP’s and is also available from the ATO website.
If the club is visited by the ATO, the following may provide some useful assistance for clubs and their officers:-
Be polite and professional, but with some formal structure.
Request formal identification from officers and record details (photocopying identity cards will not be permitted).
If the Club was advised of the visit, then the club should consider having its club lawyer or accountant present.
If ATO officers arrive unannounced, request that they provide you with any formal notices to produce documents and indicate that you intend to contact the club’s lawyer or accountant to attend the meeting. The protocols for the ATO officers are to permit the club a reasonable amount of time by which to obtain advice.
If documents are required, it is convenient to the club and the ATO to occupy an office or meeting room solely for that purpose. It also reduces the disruption to the club.
Ensure 2 club officers, or a club officer and advisor, are present in meeting with the ATO and keep detailed records.
Seek clarification of precise information sought and don’t give “off the cuff” responses as the information may not be accurate.
Offer to provide a written response to the information sought and request reasonable time in which to obtain the information.
Keep an exact copy of any information provided, and in the same format, as this will assist if further discussions are required.
If the ATO requests information formally or informally, the club should consult with its advisors and consider whether legal professional privilege (or the accountant’s concession) applies to any of the documents or whether a voluntary disclosure may be appropriate in the circumstances.
But above all, the ATO has acknowledged that the NFP Sector is generally compliant and therefore polite, professional and orderly discussions are to be encouraged.
Article Published: Club Connect – June 2011
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