Smaller business main tax rort area

SMALL business owners – not major multinationals – are Australia’s biggest tax rorters, the nation’s top tax collector has signalled.

ATO commissioner Chris Jordan says latest estimates show the small end of town is dodging a whopping $10 billion a year in tax, a gap far larger than those for big businesses or wage earners.

Speaking at a tax conference yesterday, Mr Jordan also said that following a crackdown on dodgy work-related expense claims, the average amount claimed in personal tax returns had fallen for the first time in almost 25 years.

The average work expense claim has fallen by $130 over the past two years, netting the Government an extra $600 million.

The ATO is now taking the blowtorch to rental income deductions claimed by property investors after an audit of more than 300 returns found errors in almost nine out of 10.

“We’re seeing incorrect interest claims for the entire investment loan where it has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent,” Mr Jordan said. “And when you consider that rentals include over 2.1 million taxpayers claiming $47.4 billion in deductions against $44.1 billion in reported income, you can get a sense of the potential revenue at risk.”

Speaking at The Tax Institute’s national convention in Hobart, Mr Jordan said the first analysis of the “tax gap” for the small business sector was expected to show it was running at $10 billion a year.

The gap is the difference between what the ATO estimates taxpayers owe and what taxpayers end up paying.

For small businesses, the gap is running at 10 to 15 per cent – higher than for any other sector in the economy.

“We have identified that over 60 per cent of the gap is made up of black-economy behaviour,” Mr Jordan said.