• significant differences between accounting and taxable income including the classification of income and expenses, losses and profit shifting; 
• corporate restructures, hybrid capital raising and asset infrastructure deals; 
• international tax issues including global corporate restructures that shift assets, functions and risks offshore (for example, sale of intellectual property at a nominal price in return for a royalty stream), tax havens, cross border arbitrage, transfer pricing and schemes designed to avoid non resident withholding tax; 
• profit shifting where profit reported in Australia does not match the economic contribution made in Australia; 
• payment of excessive interest, guarantees and other fees, and the provision of services by Australia headquartered companies to overseas subsidiaries at no charge; and 
• corporate governance.

Small and medium enterprises (SME)
The definition of an SME in the Compliance Program has changed and now encompasses entities with a turnover between $2 million and $250 million. There are around 130,000 businesses in this sector and the ATO collected an additional $370 million from income tax audits and $267 million from GST audits in the past twelve months.

The ATO is planning to ‘risk assess’ all enterprises in this sector, with turnover between $100 million and $250 million, over the next 4 years. This will form the basis of a preliminary review of the level of risk in this sector. There are also 595 reviews and 370 audits planned for 2008-09 and the ATO will contact around 1300 businesses by phone or letter to verify issues.

Some of the other issues under review in this sector are:

• compliance with Division 7A including the recent legislative amendments; 
• business exits and restructures including demergers, consolidation and trust cloning; 
• international transactions including profit shifting and transfer pricing; 
• treatment of trust income and the effectiveness of certain clauses in trust deeds; 
• unreported property sales; and 
• use of tax havens and preferential tax regimes.

Other areas of review
Some of the other areas identified in the Compliance Program as being under review include:

• the use of tax havens and tax schemes (with Project Wickenby continuing); 
• superannuation issues such as the illegal use of superannuation, exceeding contribution caps and meeting superannuation guarantee obligations; 
• self managed superannuation fund compliance; 
• prescribed private funds compliance; 
• high wealth individuals; 
• cash economy and small businesses; 
• unreported capital gains on shares, real property and other assets; and 
• unreported dividend and interest income.

The ATO will also expand its review of executives and directors to encompass executives of private and foreign owned companies. The review will include remuneration packaging and failing to report benefits such as bonuses and share/option benefits.

BDO comment
The Compliance Program outlines the ATO’s compliance priorities for the coming year, details the areas of risk to compliance, and how the ATO intends to respond to those risks.

While the 2008-09 Program targets similar areas to recent years, it should be noted that the ATO received additional funding in the 2008-09 Budget to pursue its compliance dividend and therefore is in the position to further increase its coverage of tax compliance issues.

Further, the ATO’s data matching capabilities are increasing as each year goes by, as is its information exchange agreements with various overseas tax authorities. This can only add to the success of the ATO’s audit and review activities.