The government has proposed to improve taxpayer compliance through new third-party reporting regimes and has undertaken public consultation to seek feedback on possible policy issues. The proposal aims to improve taxpayer compliance by enhancing the information reported to the ATO by a range of third parties. The proposal is currently scheduled to commence from 1 July 2014 (although first reports would not be due to the ATO until after 1 July 2015).
The government notes that some of the elements of the proposal can be implemented by the ATO, whereas other elements will require tax law changes. This would involve the creation of new third-party reporting regimes in relation to:
- sales of real property;
- sales of shares and units in unit trusts;
- sales through merchant debit and credit services; and
- taxable government grants and other payments.
In respect of these transactions, the government suggests that the ATO would initially seek to receive annual reports and then seek to move to quarterly, monthly or real-time reporting.
On 6 November 2013, the government announced its intention to proceed with the 2013â€"2014 Budget proposal to improve tax compliance through third-party reporting and data-matching. The proposal is designed to improve taxpayer compliance by enhancing the information reported to the ATO by a range of third parties through the introduction of new reporting regimes. It is also proposed that this information will allow the ATO to offer an enhanced pre-filling service to taxpayers. The proposal is currently scheduled to commence from 1 July 2014 (although first reports would not be due to the ATO until after 1 July 2015).
On 7 February 2014, Treasury released a discussion paper on the proposal. It notes that some elements of the proposal could be implemented by the ATO changing its administrative practices whereas other elements would require tax law changes. The paper only relates to those elements requiring legislative changes. This would involve the creation of new third-party reporting regimes in relation to the following:
- Sales of real property - To implement this proposal, the ATO would need to receive the following types of information for each real property transaction: vendor and purchaser name; vendor and purchaser address; vendor and purchaser date of birth (for individuals); vendor and purchaser Australian business number (ABN) or Australian company number (ACN) (for entities); property details, including identification and address; property type (eg residential, commercial, new residence or vacant land); contract date; settlement date; and consideration and any other costs and charges. The reporting of property information would not necessarily be restricted to an annual report.
- Sales of shares and units in unit trusts - To implement this proposal, the ATO would need to receive the following types of information in relation to each share transaction: shareholder name, address and date of birth (if applicable); shareholder tax file number (TFN), ABN or ACN (if applicable); TFN withholding tax code; "non-resident indicator" in respect of the shareholder; company name, ASX code and the CHESS and internal registry reason codes; shareholder's account holding number (Share Reference Number (SRN)/Holder Identification Number (HIN)) (if applicable); acquisition and disposal dates, prices and quantities; incidental costs (such as broker's fees); and any capital returns or payments and the associated dates.
- Sales through merchant debit and credit services - To implement this proposal, the ATO would need to receive the following types of information: merchant name, address and ABN or date of birth; all monthly purchase/sale amounts from credit card and debit card transactions; and all monthly cash-out amounts.
- Taxable government grants and other payments - To implement this proposal, the ATO would need to receive the following types of information for each grant or payment recipient: ABN (for grants and payments made to businesses); TFN or date of birth (for grants made to non-business individuals); recipient name and address; gross amount paid; total GST (if applicable); BSB and account number; and other contact details such as phone number or email address.
In respect of the above, the paper says the ATO would initially seek to receive annual reports and then seek to move to quarterly, monthly or real-time reporting.
The paper sets out a preliminary set of law design principles that could form the legislative basis for the new reporting regimes. However, it notes that the final form of any draft legislation would depend on the final form of the policy design and this, in turn, will be informed by the outcomes of the consultation process. Accordingly, the government says it is seeking feedback on policy issues and, in particular, the compliance cost impacts of the proposed reporting regimes.
The paper says the proposed reporting regimes would be designed so that, in most cases, third parties would only need to provide to the ATO information that they receive or record in the ordinary course of their business or operations. However, because an effective third-party reporting regime depends on the ATO being able to match the reported data to the relevant taxpayer, some additional identifying information may be required.
For individuals, the minimum amount of identifying information needed to provide high-confidence identity matching for tax purposes is their name, address and either date of birth or TFN. However, it is important to note that there are tax and privacy law restrictions on requesting, recording and using TFNs, which would need to be taken into account when considering the use of TFNs in these proposed reporting regimes.
For business taxpayers (including individuals who run a business), the minimum information is their name, address and an ABN, ACN or TFN.
While it is likely that many of the proposed reporting entities currently collect an entity's unique identifiers in the ordinary course of their activities, there may be some who do not. The paper says these entities would be required to collect this additional information and report it to the ATO under the proposed reporting regimes.
Public consultation closed on 11 March 2014.
Source: Treasury discussion paper, "Improving tax compliance â€" enhanced third party reporting, pre-filling and data matching", 7 February 2014, www.treasury.gov.au/ConsultationsandReviews/Consultations/2014/Improving-tax-compliance