ATO tricked 500 private companies to get vast information in exchange for being given ‘trusted’ tax status: Robert Gottliebsen

In yet another blow to confidence in the Australian business tax system, the ATO has hoodwinked 500 private companies. Picture: David Swift/NCA NewsWire

In yet another blow to confidence in the Australian business tax system, the Australian Taxation Office has hoodwinked those top 500 private companies who last year succumbed to providing vast amounts of information in exchange for being given “trusted” tax status.

The information the ATO required covered material extending to customers and suppliers.

Private companies who used accounting practitioners were required to outlay large sums to provide more than 1000 pages of material. They believed that, unless there were specific issues of alleged unpaid tax, they would have two or three years where they would be free to run their business.

But that’s not how the ATO works. It turns out that the first 1000 pages required in the inquisition was merely the trigger for even further interrogations none of which were about the tax liability of the enterprise.

This latest set of inquisitions comes as a vast number of our top private companies are struggling with issues such as labour shortages, supply problems and rising costs which their customers are struggling the pay if they are operating on fixed price contracts. This is particularly relevant in the building industry.

The tax office is completely oblivious of the damage their heavy booted inquisitors are having on this sector of our business community.

Unless government politicians in the next parliament are prepared to set proper rules for dealing with the ATO, many angry companies will consider a form of civil disobedience.

It was John Dahlsen who a year ago revealed to the nation the ATO inquisition of the top 500 private companies and on our web site are my earlier reports under the headings “Breaking the silence on tax office inquisition of private companies” and “Tax grilling strikes fear in private companies”.

Dahlsen is unique in Australia. On the one hand he represents the top end of town as a former chairman of Woolworths, a director of the ANZ for 20 years and many other board posts. But he also owns one of Australia’s top 500 private companies, the Gippsland-based building supplier Dahlsens.

A year later he explains the chilling story of what happened next.

First the ATO began a detailed investigation all the systems Dahlsens were using. This was a nightmare because like most Australian large private companies Dahlsens are shifting to totally new systems which will be far more productive. By the time the ATO understands the old system it will not exist.

But it gets worse. Next came a request for massive amounts of electronic data in relation to accounting transactions. Dahlsen says the value of this information to the ATO in gaining or collecting more tax would be close to zero and he questions whether there is any examination being undertaken of the efficiencies of the ATO in these areas.

This month in the midst of the Victorian building crisis came the next ATO game – ATO heavies wanting a personal interview. Dahlsen is actually a tax accountant and could handle the questions. Other private company chiefs might have more difficulty. The tax people took furious notes.

Dahlsen should have recorded the interview because when later he asked for a copy of the questions he was refused. It was bizarre and shows how the uncontrolled antics of the ATO are becoming dangerous to the nation.

From the questioning Dahlsen is starting to get a better idea of the hidden ATO agendas:

*“Clearly the message that the ATO would like spread amongst the top 500 and all the advisors is that they want incredibly detailed information, some of which is irrelevant for tax gathering. This is creating a sense of fear and the advisory industry which will, as anticipated by the ATO, spread that fear amongst other tax payers. This is a great new field for the accounting and law firms, and will attract healthy business and margins”.

*“The ATO would like an entity to have a charter on tax and that a Board or a Committee of the Board is responsible for tax disclosures to the ATO. Again, this is a situation where you will not be a trusted tax payer unless you have such a structure in place.

“Is the ATO trying to manage your business?

“This is an abuse of power by the ATO and it is up to the companies to make their own governance arrangements recognising that every entity is quite different. To say in effect we will not continually review your affairs if you set up this kind of structure is outrageous. Unfortunately the ATO can hide behind very powerful, one sided, statutory regime, the like of which we have in no other area of the law, even in the Crimes Acts.

*“When you look at the time and cost spent by the ATO, it would be cheaper if the ATO simply lodged a tax officer within the company who had access to anyone or anything at any time. This is the direction we are heading towards.

“Companies should ask themselves whether it is worthwhile engaging with the ATO for this so-called trusted tax payer ticket. The experience to date is that it is not worthwhile and the ATO will apply the same processes irrespectively and you will be continued to be asked for additional information just to satisfy the whims of someone at the ATO who has very little understanding of your environment”, Dahlsen says.