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The Tax Office is losing its patience. After years of watching work-related deductions climb to become one of the largest categories of tax claims, its begun an aggressive program of profiling aimed at targeting suspected cheats.

Unveiling the 2009-10 Compliance Program, Second Commissioner Bruce Quigley told the Herald the Office is sending letters to 400,000 suspects alerting them to their pattern of unusually large or growing claims.

"There are so many of them that we can't audit the lot. We are auditing the worst and issuing letters to the rest saying we are taking a very very close look," Mr Quigley says.

"In the past when a taxpayer has received a letter like that, their claims drop 27 per cent."

The Office will be singling out for special attention truck drivers, electricians, marketing managers and sales representatives...

because of rapid growth in their claims for vehicle expenses. But anyone claiming mobile phone expenses, internet expenses or home office expenses will be under increased scrutiny.

Self-managed super funds are also in the spotlight with the Tax Office concerned that "in certain immigrant communities" promoters are selling schemes too good to be true purporting to free them from the need to make contributions.

"We are working closely with the super funds who are losing business as well as the banks and intelligence agencies such as AUSTRAC and getting quite successful in freezing the transfers," Deputy Commissioner Neil Olesen says.

"We have identified a dozen of these promoters so far and we've got a major one before the courts due to be sentenced at the end of this month."

Tradespeople have for some time been singled out for special attention with the use of "benchmarks," for bricklayers, concreters, floor sanders and house painters - a program the Office is about to spread more broadly.

"For new work the cost of the paint as a percentage of what's charged to the customer should be about 30 per cent," says Deputy Commissioner Mark Konza. "Painters now know that if they buy a certain amount of paint the Tax Office is expecting them to charge three and a third times that much to the customer."

"So far we have prepared these ratios for 13 occupations. In September we'll unveil them for another 50, and eventually we'll have 100."

Businesses that suddenly become late in handing over Pay As You Go collections will receive early attention. "We have found in past economic downturns that businesses in trouble suspend payments, and then it becomes hard to bring them back, says Mr Konza.

Further up the scale the Office will be alert to the practice known as "transfer pricing" where businesses doing badly overseas transfer Australian profits offshore to write off in other tax systems.

Treasurer Wayne Swan is backing the measures, saying Australians who work hard "have every right to expect everyone pays their fair share".

But he says the program also includes compassionate measures to help
taxpayers in trouble.

Think twice before claiming that deduction

The 2009-10 Hit List

. Truck drivers
. Electricians
. Marketing managers
. Sales representatives
. Travel expenses
. Internet expenses

ATO Compliance program 2009-10


Published in today's SMH and Age

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The Reserve Bank board has flicked the switch to higher interest rates effectively ruling out further cuts as house prices and retail sales soar toward record highs.

The Bank's announcement mid-afternoon pushed up the Australian dollar 1 complete cent to more than 0.84 US for the first time since the start of the financial crisis. The share market climbed another 1 per cent to its highest point since November.

Tuesday's Reserve Bank board statement was the first in six months to announce neither a cut in rates nor the contemplation of a further cut.

Instead the board expressed concern that improving conditions might "impinge on prospects for sustainable growth and achieving the inflation target," enough to make the market price-in an even money chance of a rate hike in November...

...and a total of 2 percentage points of rate hikes by end of the next year.

Such an increase would push standard variable mortgage rates back up above 7 per cent by late next year and add $300 to the monthly cost of servicing a $300,000 loan.

Adding weight to the Bank's contention that "the risk of a severe contraction in the Australian economy has abated," retail figures released as the board met showed spending in NSW climbing to yet another record high. National spending slipped 1.4 per cent in June but remained more than $1 billion above where it was before the onset of the financial crisis.

Discounting associated with winter sales meant that the amount of goods bought continued to climb even though the total spent spent slipped with the Bureau of Statistics estimating that the volume of goods sold climbed 2 per cent between March and June.

Discretionary or "luxury" purchases climbed the fastest, with sales of watches, jewelery and flowers up 6 per cent, sales of sports goods, toys and cameras up 5 per cent and spending at cafes and restaurants up 3 per cent.

"It's a turnaround," said Commonwealth Securities economist Savanth Sebastian. "At the height of the crisis households were largely focused on spending on necessities and saving for a rainy day. Now they are treating themselves to life’s little luxuries."

Also released as the board met was official confirmation of private surveys showing house prices soaring back to pre-crisis levels. The Bureau's weighted average of Sydney house prices jumped 4.9 per cent between the March and June quarters, its biggest jump since the height of the real estate boom in 2003. The Sydney index is now just 2.8 per cent short of its all-time high.

Every city recorded solid house price gains in the quarter, even the previously ailing real estate markets of Perth and Brisbane. Melbourne house prices recorded the biggest gains, jumping 5.2 per cent.

Deutsche Bank economist Tony Meer said that far from welcoming the higher prices, the Reserve Bank would be concerned and pointed to last week's speech by Governor Glenn Stevens who said it would be "very disappointing, indeed quite disturbing" if the recovery merely boosted house prices without providing many more dwellings".

Published in today's SMH and Age

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