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ATO developing software to stop tax avoidance

The ATO is in the midst of developing advanced data programs to find individuals who are leaving a source of income out of their tax return. Analytical tools have been developed to utilise the amount of data the ATO receives to identify instances where income has gone unreported. This is to address the annual $1.4 billion tax shortfall caused by individuals who leave income out of their return.

The ATO has identified that the most common mistakes are made by taxpayers leaving out cash wages. There are also issues with the non-disclosure of income from second jobs, capital gains on cryptocurrency, the sharing economy, the gig economy and foreign-sourced income.

Concerning foreign sourced income, the ATO has identified that most funds come from the UK, USA, China, Switzerland, Hong Kong, New Zealand and Singapore. In response to this, the ATO is developing a single global standard for collection, reporting and exchange of financial account information on foreign tax residents.

The ATO imposes penalties and interest for a failure to disclose an accurate statement of income tax. The penalties can range from 25 per cent up to 75 per cent of the shortfall, in addition to paying the money owed.

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Managing risk in your SMSF

October 12, 2018

SMSFs provide the trustee autonomy and an increased opportunity to maximise your retirement savings. However, an investment strategy must be accompanied by a risk management plan should some of your investments come up short.

Consider the following risk management strategies:

Diversification
Diversification reduces risk by investing in many different assets including property, annuities and equities. By spreading your earnings across several investments you minimise the risks to your retirement nest egg that can occur if one investment suffers a loss or a disappointing return. Organise your target returns according to your asset class and establish the accepted variation range from this target. This allows you to track your investment portfolio and whether it is setting you on the right financial path.

Liquidity
If you tie up your money in assets like property, then you may run short on cash. It is important that you have cash to cover the costs of running your SMSF and in the case of a member’s total and permanent disablement. If you’re also forced to sell an asset to get this cash the market conditions may not be ideal, and you could receive a disappointing return because you need cash in a rush.