The Australian Taxation Office (ATO) is expanding the use of data matching with third parties to identify under-reporting of income and capital gains to the point where the tax returns of most taxpayers will be checked this year.

The data checking will include checking for overseas bank accounts hiding stashes of cash. The Tax Commissioner Michael D'Ascenzo recently issued a taxpayer alert warning people against hiding income or assets offshore.

"The message is simple - people should be cautious when considering whether to use offshore structures or tax havens, including Liechtenstein, for abusive purposes," Mr D'Ascenzo said.

Targeting super funds

The ATO will significantly increase compliance activity regarding self-managed superannuation funds (SMSFs) to ensure funds meet their tax obligations. In particular, the tax office is investigating SMSF operators suspected of using non-genuine loans to access their super early.

"We are currently reviewing 500 funds where their returns indicate that over 80% of assets have been loaned to others," Mr D'Ascenzo said in early March. Such 'loans' may in fact constitute early access and be against the law.

In one case, an ATO audit revealed 98% of a fund's assets had been 'loaned' to a member with no loan agreement and no repayments. The loan was used by a fund member for a business venture.

In another case, the trustees of a SMSF were fined $30,000 and ordered to pay $32,000 in costs for selling a property that belonged to the fund and then using the $150,000 in proceeds to pay a private debt.

Add it all up

Another key priority for the ATO in 2007-08 is capital gains. The ATO will monitor capital gains on property and other asset sales and will write to individuals to tell them about their tax obligations if they sold assets.

In 2007-08, around 6000 at-risk cases will be examined, including looking at taxpayers who made a gain from disposing of assets to invest in superannuation.

The ATO will also boost its surveillance of wealthy and high-income individuals and investigate cases where it appears public company executives with remuneration of more than $1 million are not fully reporting income. If necessary, tax previously avoided will have to be paid.

In terms of tax havens, the ATO is getting tough. The taxman has 20 audit cases underway relating to funds in Liechtenstein, ranging from $200,000 to millions of dollars.

"Let me once again recommend to those remaining taxpayers who are yet to own up to undeclared income in overseas bank accounts and/or overseas credit/debit cards to take up their final opportunity to come forward. We have more information available which we have not yet actioned," said Mr D'Ascenzo .

Declare it all

The ATO is also examining rental income and expenses and will examine 6000 at-risk cases, focusing on the incorrect apportionment of interest deductions, overclaiming for capital works and incorrectly claiming repair costs and borrowing expenses.

This work will include contacting tax agents whose clients have unusual patterns of rental claims.

The ATO will also write to new entrants to the investment property market before tax returns are due with advice on reporting rental income and deductions. In addition, the taxman will effectively ‘remind' at-risk taxpayers to check the accuracy of their rental property claims before lodging their return.

So if you're a property investor and you've been a tad liberal with your numbers, be warned. The ATO is watching you.

Where to find out more

The ATO lists on its website its compliance program for 2007-08 and lists its key areas of interest for individuals

First published in SuperLiving, see www.superliving.com