Tax Return:: ATO Tax Audit
Hello, this is your tax and super specialist, P&C Tax Professionals.
With an increasing number of tax audits being conducted each year, there are several factors that can trigger the ATO to conduct an audit on your tax return. In today’s blog post we will go through some of these factors and what you would need to do if you are put in such circumstances.
<What Triggers a Tax Audit?>
ATO has a sophisticated data matching system that will help them to identify any undeclared income on a tax return. If you are detected by the ATO, this will alert the ATO to perform an audit. Therefore, as an accountant, there is pretty much no chance of us knowing exactly who will be subject to an audit. However, based on our experience, we can say that the majority of the people who usually fall within ATO’s radar include those individuals who are in the following situation(s):
1. You had undeclared income for the given financial year.
EX) Capital gains from your share or crypto trading, bank interest income, small business income, etc.
2. You have claimed a substantial amount of work-related deductions (especially relative to your income).
EX) Education expenses which includes your tuition fees and car expenses are usually prone to a tax audit.
3. Tax return that does not fit your lifestyle.
EX) If you have an excessive amount of assets (including motor vehicles, boats, property, etc.) but you only report $15,000 as the income you have earned during the year, obviously the ATO will scrutinise your tax return.
<What To Do Once an Audit is Initiated?>
Even if you are subject to an audit, as long as you provide the documents and information requested by the ATO in a timely manner, the ATO will actually refund you the interest for the delay in your tax return. Therefore, in case of such an unforeseen event, it is highly recommended that you practice good record-keeping habits so that you won’t have to go out looking for all your documents during tax time. Some of the main documents you should have in handy during tax time include:
> Your bank statements as verification of your income and address
> Letters and tenancy agreement forms to verify your residential address in Australia
> All of the payslips and/or pay summaries for the relevant period
> All of your tax invoices for the work-related tax deductions you are claiming for
If ATO were to detect that you intentionally provided misleading information on your tax return, you may be fined anywhere from $4,440 up to $13,320. Hence, it is absolutely crucial that you ensure that your tax return includes all of the income you earned during the financial year and make sure that you only claim for the work-related portion of your expenses.
On that note, if you are in need of assistance with preparing for your tax return, please feel free to contact us through our official Facebook Page (P&C Tax Professionals – Australia) or simply send through your enquiries directly to our email address at pntax@naver.com.
Thank you and bye for now!