Tax cheating convictions for the September quarter rose 20 per cent as the Australian Taxation Office stepped up its enforcement campaign.

For the September quarter, the ATO recorded 478 prosecutions, compared with 398 for the same quarter in 2010. Individual taxpayers made up the bulk of the convictions for the quarter at 356 or 74 per cent.

Acting Tax Commissioner Jennie Granger said that while convictions may result in prison sentences of up to five years, those who are not given jail would still have a permanent criminal record which would disqualify them from some kinds of employment and possibly travel restriction to some countries.

To plug the $20-billion federal budget deficit, the ATO introduced a new Reportable Tax Position system which mandated companies to alert the Tax Office to any tax decisions that appear contestable. The ATO rolled out the system on a pilot basis with 56 Australian companies participating.

The 56 includes some of the largest firms listed with the Australian Securities Exchange, multinational companies and private equity operators.

"For the ATO, this means better transparency and greater efficiency. For business, this means a new source of pressure on corporate governance, because you will be obliged to draw up your own tax-uncertainty roadmap and then lodge it with the tax return," The Sydney Morning Herald quoted Niv Tadmore, a partner of Clayton Utz.

Besides the Reportable Tax Position, the ATO can demand access to tax records of large firms before it filed their tax returns and in some cases, it could conduct quarterly pre-lodgement reviews.