The tax office audit project known as the “Low Doc Loan Project” has been going for nearly four years. Auditors are trying to stitch up taxpayers with big tax bills on the basis of inflated income figures provided to lenders. But who’s really guilty of inflating the figures?
Low-doc loans may be easy to get but it’s not worth fudging the figures. If you don’t want a tax audit, steer clear of low-doc home loans. The tax office has found that nearly half the people who apply for these loans have not lodged tax returns at all or for many years. They also believe that self employed people are concealing income from them.
Current audit figures have not been publicised but in 2006 the Commissioner announced that the project had raised $23 million in tax and penalties. Michael D’Ascenzo thinks he’s hit paydirt but do the results tell the whole story?
I’m aware of a number of cases from my own experience and that of other tax consultants that does raise questions about the tax administration. It also raises questions – again – of the mortgage broking industry.
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In many cases I’m aware of it was the mortgage broker who lodged the false information to the lender without the knowledge of the borrower. Some brokers even lodged dummy tax returns to make it look more real. The tax office, quite rightly at first impression, has got excited about this and wants to issue multi million dollar assessments against the taxpayers.
They even interviewed the brokers who said the information in the dummy tax returns was provided by the taxpayers. Tosh! The brokers in fact lodged the false information so they could collect their $20,000 commission fee for getting the loan approved and avoid any potential action against them for mortgage fraud.
Most of Australia is aware of the hanky panky goings on with the mortgage broking industry in this country – not to mention the sub-prime crisis gripping the US. This industry and its rogue operators have been discussed in Parliaments around Australia as well as state and federal regulatory agencies yet the tax office seem happy to want to take their word so they can issue big tax bills and help Mr D’Ascenzo bring in another budget surplus. How many people do you know that have told fibs to lenders to get finance for something?
Since Michael D’Ascenzo became Commissioner in January 2006 there has been a major shift to reign in the leaking tax dollar. D’Ascenzo has been successful in mounting public scare campaigns to frighten taxpayers to come forward and confess their tax foibles. Also tax office managers play hard ball when trying to negotiate settlements unless you’re a big company or an influential political party donor. On the other hand the ATO under D’Ascenzo has twice failed annual service standards for taxpayers yet paid his senior executives performance pay.
Let’s hope that Newcastle MP Sharon Grierson, who was recently elected to chair Parliament’s powerful Joint Committee of Public Accounts and Audit, questions D’Ascenzo about some of these issues when he fronts her soon in the bi-annual public hearings with the Taxation Commissioner.