In June last year I announced we had begun to investigate whether
people using low documentation loans were likely to have tax compliance
issues. This early work suggested many people using these products had
either understated their income or failed to lodge income tax returns.
Our work since has confirmed our concerns.
In the first of our compliance initiatives, around 350 taxpayers
were selected randomly from eight lenders to get a picture of the
broader population using these products. This information was obtained
using the access powers in the tax law. It identified failure to lodge
tax returns as a primary concern.
Around 50 per cent of these people had not lodged returns – the average was three years outstanding…
In a second initiative we undertook a risk based approach that showed
that, for certain low documentation loan users, concealment of income
is a significant concern…
Although our findings indicate concerning levels of non-compliance
amongst the users of low documentation loans, many users of these
products are fully meeting their tax responsibilities. Many are funding
repayments from legitimate sources like inheritances and capital gains,
often derived from investments in property.
