A Bill has been introduced to Parliament proposing to empower the ATO to issue what will be described as a ‘tax-records education direction’.
Under current law, businesses that fail to meet their record-keeping obligations under taxation law are subject to an administrative penalty.
Under the new law, as an alternative to the administrative penalty, the Commissioner of Taxation may direct an entity (including an individual operating as a sole trader) to undertake an approved record-keeping course where it believes that the entity has failed to comply with its record-keeping obligations.
This supports the recommendation outlined in the Taskforce’s Report for the ATO to have a range of administrative sanctions at its discretion and recognises that an entity’s failure to keep appropriate records can occur for a variety of reasons including unintentional mistakes, knowledge gaps, or variations in levels of digital literacy.
The purpose of the tax-records education direction is to address these knowledge gaps and reduce cases of non-compliance through the use of an approved course of education, which will help entities better understand their tax-related record-keeping obligations.
Where an entity, or person involved in the significant decision-making processes of the entity, is directed to undertake an approved course of education, the administrative penalty will not apply if a) the approved course of education is completed before the end of the specified period and b) if evidence of completion is provided to the Commissioner of Taxation.
This will encourage entities to undertake the education course and gain a better understanding of their record-keeping obligations. It is
proposed that such directions should only be issued where the ATO reasonably believes the taxpayer is not disengaged or has been
deliberately avoiding their tax-related record-keeping obligations.