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Editor: Although we are always acting on behalf of our members "behind the scenes", the NTAA is also very active in the media, making a lot of noise about issues dear to the hearts of our members and their clients.

We've set out some of our recent media releases below, as they are (naturally) quite informative, but also so that you can see the issues we've been tackling...and who we've been tackling...

ATO tax return "hit list"

Employees will soon be receiving group certificates and lodging their 2006 income tax returns hoping for a big refund, but they should be aware that the Tax Office is ready to pounce if they leave income out or claim too many deductions, Darren Wynen, Spokesman of the NTAA, warned today.

Specifically, the Tax Office has said that it is targeting:

• Employee shares and share options;
• Share transactions – The Tax Office is using its data matching to pick-up taxpayers not including all their dividend income;
• Rental properties – The Tax Office is focusing activities on people who understate their income or inflate their rental property deductions; and
• Work-related expenses – The Tax Office is focusing attention on large claims for work-related expenses, especially if taxpayers have not kept supporting receipts and invoices etc.

"The Tax Office is concerned about a blow-out in rental property deductions because of the number of new entrants to the investment property market," says Darren Wynen. "Rental property owners can expect very close scrutiny on their travel expenses, initial repairs and renovations to rental properties."

"The Tax Office is also very concerned about work-related expenses. Hot spots on the Tax Office’s hit list include, home office expenses, mobile phone calls, internet usage, and travel expenses. Also, in some industries, such as the hospitality industry, clothing, laundry expenses and self education expenses will receive close scrutiny."

Ref: NTAA media release 18 July 2006

Child care – It’s broke so let’s fix it!

The NTAA has today challenged the Federal Government to extend the tax concessions associated with child care costs. In particular, the NTAA believes the current child care tax offset should be scrapped and parents should be entitled to claim a full tax deduction for these costs.

Under the current rules, parents are entitled to claim a tax offset of up to $4,000 per child during the 2006 income year, and this is calculated at 30% of net child care costs.

Unfortunately, spiralling child care costs have meant that many parents are still out-of-pocket by thousands of dollars even after taking into account the tax offset. This has meant that many parents have decided to remain home and look after their children because they see this as the cheaper alternative.

Andrew Gardiner, Spokesman for the NTAA today stated "One of the effective ways of rewarding parents who return to the workforce would be to make child care costs fully tax deductible. Such an initiative creates a win-win situation. This is because parents claim a full tax deduction for their child care costs and the Government also collects additional taxes from the parent returning to the workforce."

Andrew Gardiner also stated "Employers would also win under such an initiative because they would be entitled to pay for an employee’s child care costs and claim a tax deduction without being subject to Fringe Benefits Tax which is currently levied at 46.5%."

Ref: NTAA media release 27 July 2006

New rules set to "tighten the noose" on bankrupts

The NTAA has today welcomed changes to the bankruptcy laws which prevent taxpayers from avoiding creditors by making large contributions into superannuation.

Prior to these announced changes, a recent case established a principle which meant that creditors of a bankrupt were unable to "clawback" superannuation contributions that were made by the bankrupt prior to bankruptcy. In general terms, this decision meant that taxpayers who were on the brink of bankruptcy could protect some of their assets by making large contributions into superannuation.

However, the proposed amendments will ensure that creditors will have access to these superannuation contributions where it can be proven they are "out of character" and appear to have been made to avoid creditors.

Steven Cane, Spokesman for the NTAA, today stated "These changes represent a victory for common sense and ensure that creditors are protected from unscrupulous taxpayers who attempt to avoid paying them by making superannuation contributions."

Steven Cane also stated "The government has also agreed to limit the new rules so that genuine superannuation contributions made prior to bankruptcy are still protected. This facet of the measures protects "legitimate" superannuation contributions and will represent welcome relief for many small business taxpayers".

Ref: NTAA media release 28 July 2006

Tax profession in crisis?

The Inspector-General of Taxation, David Vos, has recently released a submission for a government inquiry in which he identified a number of pressing issues with the tax industry. In his report he had made observations regarding the enormous workload of tax agents, difficulties the profession has with keeping up to date and concerns about people leaving the tax profession which may ultimately lead to a shortage of experienced tax agents.

However, the NTAA does not accept comments, apparently made by Mr Vos, that under proposals for a new framework for tax agents that "half may be delisted." "That is just not on" said Andrew Gardiner.

Nonetheless, the NTAA is tremendously concerned that the workload and complication of the tax system is forcing experienced tax agents out of the tax profession. Ultimately, this possible exodus from the tax profession could lead to a shortage of experienced tax agents to prepare individual and business tax returns which are an integral part of our tax system.

Andrew Gardiner today made the following comment "The observations made by David Vos probably only scratch the surface. We receive constant feedback from members who are reeling from the workload created by our tax system. These are experienced people who have been in the industry for many years and who are now considering leaving the industry because of the enormous workload."

Andrew Gardiner also stated "Recent attempts by the Tax Office, the new Tax Commissioner and Government to streamline the tax system have been a step in the right direction. However, there is still a lot of work to do and this problem needs urgent and ongoing attention."

Ref: NTAA media release 1 August 2006

Abolishing tax returns would cost millions!

The NTAA has today warned that the recommendation by the Organisation for Economic Co-operation and Development (OECD) to abolish tax returns for salary and wage earners would cost hard-working Australian taxpayers millions of dollars in legitimate tax deductions. The taxpayers who would be hardest hit by such a proposal would include teachers, nurses, plumbers, electricians, builders, shearers, flight attendants and salespeople.

The NTAA is concerned that such a recommendation has been repeatedly suggested as a reform measure by "faceless men" and now the same issue has been raised by the OECD. It is a recommendation that would see thousands of honest, hard working Australians, lose their entitlement to claim legitimate work-related expenses.

As a result, the NTAA calls upon the Howard Government and the opposition to categorically "rule out" any proposal that would see the abolition of individual tax returns for salary and wage earners.

Andrew Gardiner today stated, "Implementation of this recommendation would create a huge windfall for the Tax Office and Treasury.

"Unfortunately, honest, hard working Australians would again be the "scapegoat" for a tax reform measure that ultimately would cost taxpayers millions."

Andrew Gardiner also stated, "We can only hope that the final chapter of this proposal can be closed and the best way for this to happen is for the Howard Government and the opposition to categorically rule out implementing such a policy."

Ref: NTAA media release 1 August 2006

Tax cuts, what tax cuts?

Research undertaken by the NTAA, has today revealed that recent interest rate hikes now exceed the tax cuts that have applied to average Australians from 1 July 2006. In fact, the average Australian is now $601 worse-off after taking into account the two recent interest rates hikes.

Information supplied by the Australian Bureau of Statistics ("ABS") for February 2006, revealed that the average weekly salary of a full-time employee was $1,084 or $56,378 annually. From 1 July 2006, this means that an employee earning the average annual amount of $56,378 will receive tax cuts of $510.

However, recently reported information indicates that the average mortgage is $222,200 and this translates to additional interest payments of $1,111, after taking into account recent interest rate increases of 0.5% (i.e., during May and August 2006).

This means that the average Australian is now $601 (i.e., $1,111 - $510) worse-off, after taking into account the so called "tax cuts" (from 1 July 2006) and the recent interest rate hikes.

Andrew Gardiner today stated "Our research clearly illustrates that the last round of tax cuts have effectively been "stream rolled" by the interest rate hikes. It’s little wonder that many Australians will again be asking themselves, where did my tax cuts go?"

Andrew Gardiner also stated "Unfortunately, for many Australians these interest rate hikes will represent the straw that broke the camel’s back".

Ref: NTAA media release 3 August 2006

Tax debts for small businesses raging out of control!

Tax experts have today warned that small business tax debts are raging out of control with these businesses currently owing approximately $6.5 billion in tax. Failure to collect these debts is likely to put a major dent in the Federal Government’s 2007 Federal Budget cash surplus estimate of $10.8 billion.

Anecdotal information suggests that small businesses are placing a low priority on the payment of tax debts and this has compounded the problem. This attitude has meant that many businesses are accumulating large tax debts because they are choosing to pay other creditors in preference to the Tax Office.

Andrew Gardiner today stated "Small businesses need to understand that the Tax Office should be treated with the same importance as other creditors. In fact, from a legal perspective, the Tax Office often has preference over other creditors".

Andrew Gardiner also stated "The Tax Office has been placed in an uncomfortable position. On one hand, they must collect legitimate tax debts from small business and, on the other hand, they do not want to be seen as sending small businesses to the wall."

"Put simply, the Tax Office is in the classic lose-lose situation."

The NTAA is currently consulting with its members and the Taxation Office to develop strategies aimed at reducing the level of tax debts owed by family business and to assist these businesses manage their cash-flow.

Ref: NTAA media release 10 August 2006

ATO announces "crackdown" on employee expenses!

Tax experts have warned that employee work-related expenses will be "put under the microscope" as part of the Tax Office’s "crackdown" for the 2006/07 year. The Tax Office has today released its annual compliance program in which it foreshadows special attention being paid to work related expense claims made by taxpayers operating in the following professions/industries:

• business professionals, including accountants;
• hospitality;
• factory hands and store workers;
• mechanical, automotive and electrical trades;
• information technology professionals; and
• mining.

Last year, 7 million employee taxpayers claimed tax deductions for work-related expenses totalling $11.5 billion. The Taxation Office is concerned about the meteoric rise of work-related expense claims and it has decided to adopt more sophisticated audit techniques and expects to review almost 250,000 employees.

Andrew Gardiner today stated, "There is little wonder the Tax Office is cracking down on work-related expenses when you consider they were approximately $11.5 billion last year. It is clear that all work-related expense claims will now be under the microscope."

Andrew Gardiner also stated, "The bottom line is that taxpayers who make dodgy claims will get caught. The Tax Office’s audit programs are far more sophisticated and there are more auditors ready to pounce on anybody who tries to rort the system."

Ref: NTAA media release 17 August 2006