No Cheating! ATO Tax Audits Are Now More Accurate Than Ever
Over the past few years, the Australian Tax Office has gotten more and more accurate at discovering errors in tax returns. When you lodge your return this year, the ATO will be at their most accurate yet. With the use of advanced technology and data collection practices, they can quickly and easily identify problems with tax returns.
In fact, many aspects of your finances, such as business income and dividend payments, are regularly reported to the ATO, something which you may only realize once you’ve lodged your return. The tax office even compares your data to people in similar income categories in an effort to ensure that your deductions make sense. Explains Assistant Commissioner Kath Anderson, “If a claim raises a red flag in the system, we will investigate further. We have a range of strategies to make sure people pay the correct amount of tax, ranging from HELP and education through to audits and even prosecution for more serious cases.”
This year, the ATO is especially focused on work-related expenses, particularly those work-related expenses deemed “other” work expenses. These expenses are meant to include such things as union fees and certain home office costs, but the ATO has found that these claims are often incorrectly reported — leading to audits.
Random Audits Are Becoming Increasingly Common
The ATO began focusing on work-related expense deductions as far back as 2016, after determining that such expenses may be overclaimed. As a result, the ATO has been conducting random audits of taxpayers over the past 2 years — and they have indeed found an alarming number of errors, including false deductions that aren’t related to work expenses at all. “Many taxpayers make legitimate claims, but we are also seeing errors in some claims, and some taxpayers are making risky or outright false claims,” says Anderson. Considering that 7.9 billion dollars worth of “other” work-related expenses was claimed by Australians last year, the ATO will be closely scrutinizing every tax return this fall.
Avoid the Audits
No one wants to find themselves in the middle of a tax audit. When it comes to lodging your tax return this year, remember that work expenses can only be claimed if:
- You paid for the expense without reimbursement.
- The expense is directly related to your ability to earn income.
- You have the receipts and records to prove the expense.
These criteria points to the most basic, important rule to remember throughout your financial year: Keep your receipts. Even if your claim is legitimate, a lack of proof will render your claim void — and put you at risk of a frustrating audit. “It’s important that you have a record of the expense and can demonstrate how you calculated your claims,” Anderson adds. “Every year we disallow lots of claims because there is no evidence to prove the expense.” It’s also important to remember that if you want to claim an expense that is used for both work and home (such as your phone), you can only claim the part of an expense that is used for work. This can get complicated, and is another area where good record-keeping is essential.
Other things to keep in mind this tax season include knowing what exactly you are and are not allowed to claim on your tax return. The ATO website is an excellent resource for basic questions, but for more personalized insight, TCA Darwin can offer expertise. Common mistakes include wardrobe and phone or Internet claims. Remember that you generally cannot claim:
- Your day-to-day attire, such as a business suit. Your uniform can only be claimed if it is extremely specific to your position, such as a chef’s outfit.
- Your private phone or Internet. You must determine the percentage of your use that is related to work, and you will likely need documentation to back up your claims, such as a bill. This is absolutely required if you’re claiming more than AU$50. If you’re a casual employee, or use an employer-provided phone, you cannot claim this deduction at all.