ATO closing tax gaps
As part of the ongoing focus on closing tax gaps, the Australian Taxation Office (ATO) are scrutinising every tax return lodged and are on the lookout for incorrect claims this tax time.
Assistant Commissioner Karen Foat is assuring taxpayers who are doing the right thing, and only claiming what they’re entitled to, that they have nothing to fear from a potential audit. For people who have done the wrong thing, even if that’s over-claiming by a little, her advice is that the best thing they can do is to fess up sooner rather than later.
“Each year the ATO contacts around two million people about their returns. In most cases, audits are not our first action.
“Third-party data indicating under-reported income, and deductions that appear high compared to people with a similar job and income level, tend to raise concerns.
What to expect if you are audited
“If we do decide to look a little closer through an audit, you can expect that we will contact you or your tax agent to make further enquiries.
“The sort of information we may need from you or your agent will vary depending on the circumstances. Often, we are just looking for an explanation and documentation on a deduction. For example, if you’ve claimed deductions for clothing but you work in a job where a compulsory uniform is unlikely – we may just want to know a little more about why you’ve claimed that deduction.
“Other times, we may need to have a more detailed review. Though again, this generally involves us asking you or your agent for more information or evidence to support your claims
“We will always let you know what issues have attracted our attention and what information we will need from you.
“Our biggest tip is to ensure you work with us from the beginning and provide the information required to help us resolve any concerns and finalise the audit.
“We understand it can be frustrating to dig up old receipts and information, but it is necessary. A small amount of over-claiming by a large number of people adds up to $8.7 billion dollars less each year for essential services, we can’t turn a blind eye to that.
“Instead, we are focused on making it easier for you to keep the required records – the myDeductions tool in the ATO app allows you to snap a picture of all your receipts and upload your deduction details directly to your tax return. For more information visit: ato.gov.au/mydeductions.
The better your record-keeping is throughout the year, the easier the audit process is likely to be when we request to see your records.
“Our staff may also request information from others, for example in some circumstances we may contact your employer to check that you weren’t reimbursed for any expenses that you claimed or to verify that your expense was related to earning your income.
“Whether we apply penalties will depend on your behaviour. We see behaviours ranging from genuine mistakes through to deliberate over claiming. In the most extreme cases of intentional fraud we may seek to prosecute through the courts.
“We will keep you updated throughout the audit process. This includes letting you know in writing that the audit is finished, whether or not we have made any changes to your return, and how we came to our decision.
“The best way to ensure a smooth audit process is engage with us early and to keep accurate records” Ms Foat said.
What if you know you’ve over-claimed (even by just a little)?
“If you think you’ve made a mistake or an error in your tax return, the best thing you can do is to ‘fess up’ as soon as possible” Ms Foat said.
“If we haven’t been in touch with you yet, you can amend your return yourself on myTax or if you use an agent to ask them to lodge an amendment for you.
“If the ATO has been in contact to review your claims and you know you’ve over-claimed, it is important to be honest and get the matter resolved quickly. Taxpayers are more likely to face penalties if they aren’t honest with us once we come knocking” Ms Foat said.