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Taxes and royalties

Audit and investigations

We conduct audits as part of our investigations program to ensure that our clients are paying the correct amount of tax or duty. We also check that clients receiving a grant are eligible.

Some of the ways we identify who to audit include:

  • data matching
  • information received from the general public
  • referrals from other government agencies
  • random sampling.

Audits

Preparing for an audit

In most cases, our auditor will telephone you to:

  • arrange a time and place for an initial interview
  • explain the audit process
  • advise you which records will be inspected
  • give you an indication of how long the audit will take.

The auditor will usually allow a reasonable time for you to prepare records and will confirm these arrangements in writing.

You should:

  • take note of the name and telephone number of the auditor
  • make sure you understand which records we need to see
  • review the records before the auditor arrives to see if you have made any unintentional errors.

A voluntary disclosure to the auditor will save time and generally result in a lesser penalty.

You may wish to seek professional advice if you are dealing with complex matters.

Your legal obligations

You are obliged to provide our auditors with documents (unless they are subject to a valid claim for legal professional privilege) or other information when asked.

Our auditors have the authority to:

  • enter public places and places of business during their normal opening hours
  • enter residential premises with consent (or a warrant)
  • inspect, copy and seize documents and things.

Generally, we will work with you to receive the correct information without needing to exercise our powers.

Your rights

Before the audit

You have the right to ask the auditor:

  • for a reasonable time to produce your records
  • about the time and place for the audit
  • to provide a letter confirming the audit arrangements.

During the audit

During the audit, we will normally interview you and examine your records to see if they comply with the revenue laws. Any information we obtain through an audit is treated confidentially—it will only be disclosed for limited purposes prescribed by law.

You have the right to:

  • see the auditing officer’s identification
  • involve your accountant or legal adviser
  • receive auditor conduct that is professional and courteous
  • be asked clear questions
  • ask how long the audit will take
  • receive a copy of any formal record of interview
  • receive a receipt for any records taken from your office.

After the audit

You have the right to:

  • receive a full explanation of any adjustments made as a result of the audit
  • explain reasons for any irregularities or issues
  • receive an explanation of how and why any penalties and interest have been applied
  • discuss the audit with the auditor’s supervisor.

You also have a statutory right to:

Penalties

Penalty tax

In some circumstances, penalty tax will apply at a rate of 75%. Unpaid tax interest may also apply.

Cancellation or suspension of registration

Under section 469A of the Duties Act 2001, the Commissioner of State Revenue may suspend a self assessor’s registration immediately where:

  • grounds for suspension and cancellation exist, and the Commissioner believes it is necessary to protect the integrity of the online self assessment system, OSRconnect

or

  • the Commissioner believes there is an unacceptable risk the self assessor will not comply with an obligation under the Duties Act or the Taxation Administration Act 2001.

Investigations

Our investigations program outlines the focus of our verification, investigation and enforcement activities.

Compliance

Our approach to compliance is to help clients and their advisers to understand their rights and obligations, and we encourage and support voluntary compliance.

Our client charter promotes an open and fair relationship with our clients in accordance with the law. We regularly update information online, and provide information sheets and public rulings to educate clients on how to comply.

We verify compliance using a risk-management approach, targeting the areas of greatest risk.

Our investigations program provides for proportionate and tailored responses, taking into account the reason for non-compliance and client circumstances. A key approach for us is to differentiate between clients who try to comply and those who do not. We support clients who try to do the right thing, and take firmer action against those who do not.

Client attitude Compliance response Options
Willing to do the right thing Make it easy
  • Encourage self-regulation
  • Provide appropriate administrative processes
  • Provide education tailored to the needs of client segments
  • Make information clear and easy to access
Try to, but don’t always succeed Help to comply
  • Identify non-compliance from verification and data-matching activity
  • Remind clients of their obligations and entitlements
  • Conduct audits and reviews
  • Impose appropriate levels of interest and penalties
Don’t want to comply Deter by detection
  • Conduct audits and investigations
  • Investigate individual transactions and avoidance schemes
  • Impose appropriate levels of interest and penalties
Have decided not to comply Use full force of the law
  • Conduct audits and investigations
  • Investigate individual transactions, avoidance and evasion schemes
  • Impose appropriate levels of interest and penalties
  • Prosecute

Duties compliance

Transfer duty self assessors

Our compliance activities include ensuring that transfer duty self assessors:

  • apply the aggregation provisions (s.30) to dutiable transactions that together form, evidence or give effect to one arrangement
  • use the correct dutiable value (including GST where appropriate)
  • verify that clients are eligible for any concession or exemption they claimed
  • keep complete records relating to transactions on file (e.g. completed and signed concession forms, related party valuations, statutory declarations and any other supporting documentation required as evidence of the transaction).

Case study

As part of an arrangement, Purchaser Pty Ltd signed 2 contracts dated 10 January 2012 to purchase 2 development sites in Queensland from Vendor Pty Ltd, for a consideration of $500,000 for each site. Because of the overall transaction, the parties entered into an implementation deed along with separate contracts for the sale and purchase of each development site.

Self Assessor Associates assessed the transaction. They did not consider that s.30 of the Duties Act 2001 applied to the purchase agreements, and stamped the documents on that basis. Transfer duty of $31,050 was paid, being $15,525 for each contract.

Purchaser Pty Ltd then lodged the stamped transfers with the Department of Natural Resources and Mines.

We then identified this discrepancy through data matching and determined that s.30 was applicable. Accordingly, we reassessed duty as $38,175, based on the aggregated consideration of $1 million. Additional transfer duty of $7,125, together with unpaid tax interest of approximately $570, was recovered from Purchaser Pty Ltd. Penalty tax also applied, because the Commissioner was not satisfied that Purchaser took all reasonable care and did not disclose all relevant information to Self Assessor Associates.

Home, first home and vacant land transfer duty concessions

Transfer duty concessions are available for people buying a home or vacant land that they will build their first home on.

We conduct verification and data matching with government and private sector agencies to identify non-compliance with the home concession requirements.

Case study

Mr Jones signed a contract on 1 September 2011 to buy a home in Queensland for $480,000. Mr Jones applied for the first home concession and paid no duty.

Before signing the contract to buy the property, and before applying for the transfer duty first home concession, Mr Jones accepted a transfer with his employer. Under the employment transfer, Mr Jones had to live permanently interstate for 2 years, starting before the transfer date of the property and ending more than 1 year after that date. As Mr Jones could not live in the property, he rented it out. He did not advise us that he would not be able to meet the concession requirements.

Using data matching, we identified that Mr Jones had not met the eligibility requirements. Once he had been notified that we were investigating, he lodged a Notice for reassessment of transfer duty home and vacant land concessions (Form D2.4).

We issued Mr Jones with a reassessment, requiring him to pay:

Insurance duty self assessors

We also ensure that insurance duty self assessors correctly:

  • classify their insurance products as general, life or accident insurance
  • calculate the dutiable value for the policy (including GST)
  • apply the rate of duty to the insurance policy.

Payroll tax compliance

Our focus areas include:

  • employers who employ in Queensland, have annual total Australian wages of more than $1.1 million, and have not registered for payroll tax
  • wage and deduction discrepancies, including failure to declare all
    • eligible terminations payments
    • payments for employee share schemes
    • salary sacrifice superannuation payments
    • cash payments to employees
    • grossed-up fringe benefit tax payments
  • the obligation to register and report as a group where businesses are either
    • related bodies corporate
    • linked by common ownership or control
    • linked by shared employees
  • the obligation to include wages
    • paid or payable to contractors where the contract is characterised as one of employment (rather than a contract for services)
    • relating to ‘relevant contracts’ (post 1 July 2008).
Case study 1

Through data matching with other government agencies’ data, we determined that 3 companies should have been grouped for payroll tax.

None of the companies were registered for payroll tax, as each company’s individual wages were below the registration threshold based on Australian wages. However, their total wages exceeded the $1.1 million threshold.

We wrote to each company, asking them to declare their taxable wages for payroll tax and to provide certain information and documents to support their declaration.

On receipt of this information, we:

  • notified the companies that they were grouped
  • nominated a designated group employer (DGE)
  • issued payroll tax assessments to each company that had a payroll tax liability.

Unpaid tax interest was applied to each company’s payroll tax liability. Because the companies cooperated fully during the audit and there was no evidence of deliberate non-compliance, penalty tax was substantially reduced.

Case study 2

A medical centre engaged doctors to practise in a surgery. The medical centre determined that the payments to the doctors were wages under the relevant contractor provisions that came into effect from 1 July 2008.

However, an investigation into the liability of the medical centre before 1 July 2008 showed that the doctors were not independent contractors, based on the contractual arrangements between the medical centre and the doctors. The nature of their relationship was that of employer and employee. The payments to the doctors before 1 July 2008 should have been treated as taxable wages for payroll tax purposes.

The medical centre had to pay:

  • payroll tax on its taxable wages for the 2 years before 1 July 2008
  • unpaid tax interest
  • penalty tax.

Grant compliance

Our focus areas include:

  • monitoring applicants’ compliance with the residency and other requirements for receiving the grant
  • ensuring that lending institutions who are approved agents of the Commissioner of State Revenue comply with their obligations, including
    • keeping full and correct records
    • correctly entering data into the first home owner grant (FHOG) online system.
Case study

On 28 February 2012, Mr and Mrs Brown signed a contract to buy an established home in Queensland for $435,000. Because they never owned a home before, Mr and Mrs Brown claimed the:

  • first home transfer duty concession (through their solicitor)
  • first home owner grant of $7,000 (through their financial institution).

Mr and Mrs Brown moved into the home on 1 April 2012, but sold it 3 months later to move closer to Mrs Brown’s elderly mother. They did not advise us that they had sold the home.

Through data matching with government and other agencies, we identified that Mr and Mrs Brown had not met the first home owner grant eligibility requirements (i.e. they did not live in the home for a continuous period of 6 months).

Mr and Mrs Brown were required to:

  • repay the $7,000 grant
  • pay a penalty amount of 25% of the grant—that is, $1,750.

As the couple also breached the conditions of the transfer duty home concession, we issued reassessments requiring them to pay:

Royalties compliance

We conduct investigations to ensure that resource permit holders are meeting their royalty obligations.

Complex investigations

Our focus areas include:

  • large business—establishing relationships with key clients, and conducting audits to ensure compliance with their duty and payroll tax obligations
  • large and complex transfer duty transactions—Commissioner assessment of landholder duty and other large transactions
  • avoidance and enforcement—detecting and deterring avoidance and evasion of tax, including prosecution of those committing offences.

Current compliance projects include:

  • landholder duty
    • providing education to industry bodies and advisers
    • developing data-matching capability
  • trust transactions—trust acquisitions, surrenders, creations and terminations in unit trusts
  • transactions involving mining interests
  • corporate reconstruction exemption—entitlement and post-association
  • insurance duty
    • computer-assisted verification of major general insurers’ systems
    • review of policy portfolios and treatment of each policy for insurance duty purposes
  • payroll tax
    • risk assessment of large employers
    • audits of large employers using computer-assisted verification
  • avoidance schemes.

Reporting non-compliance

If you suspect an incident of non-compliance, you can report it in confidence by:

To find out more or to make a voluntary disclosure, you can:

Last updated: 2 February 2018