In a perfect world, absolutely no one would get audited, and everyone would be doing the right thing when it comes to their tax returns. But alas, here we are! Sometimes it is an honest mistake, and sometimes? Its 100% deliberate. Either way we all lose out.
The Australian taxation system has been designed to be fair to all, so it is important each one of us pay the correct amount of tax each year. Did you know the ATO on average, contacts 2 million taxpayers each year to review their tax returns? Not all will be subject to a complete audit, however. Don’t assume it won’t be you.
People who deal with mostly cash or have experienced a large fluctuation in their income are more likely to attract attention from the ATO. But in the end, anyone can be contacted, so make sure you stay on top of your paperwork and keep those receipts! Keep any sort of supportive documentation – a full audit from the ATO can take up massive amounts of time and resources.
There are a few smart things you can do to reduce your chance getting audited:
Always lodge your tax returns on time
Staying on top of your returns and allowing plenty of time to get together and lodge your documents means you are much less likely to make a mistake. It also means you are less likely to be scrutinized by the ATO like those who lodge late.
Review your calculations and check your deductions
Sounds boring right? Checking your numbers, thrice, is a good way to make sure everything is correct. Its easy to make mistakes (like adding an extra 0) and working with a tax agent is a good way to make sure you tick all the right boxes; a good accountant will pick up on that extra 0!
Declare deductions – but only legitimate ones!
No, you cannot claim 5,000kms with out substantiation. Soz! There are lots of different deductions you are really entitled to claim, though it varies greatly depending on your occupation and industry. If you work with a tax agent, they will be able to highlight any deductions you may have missed, so you get the maximum possible refund – legally!
Keep receipts & records
This is an important one. Hold onto those receipts for every single item you claim. Its ok if it’s a digital record. Download the ATO myDeductions app to snap a picture and have them stored, as long as they are stored somewhere! It will need the date, cost, vendor, and details of the items clearly visible.
Be careful with Cash
Certain jobs and industries rely more on cash payments (taxis, shopkeepers) and that’s all good, provided you keep careful records of all transactions.
The ATO tends to look closely at cash-based businesses. It is easy to avoid any issues by being super-duper organized with your records to prove you aren’t under declaring your income.
Clarity is Key
If the ATO is easily able to understand all of your tax claims, they are less likely to need to follow up. If you are vague and downright suspicious with your claims, they are probably going to flag you and ask for more information.
There are a lot of “experts” out there who will tell you they can maximize your deductions and get you more money by using dubious claims. Do not forget that YOU are the one who is responsible at the end of the day. You are the one that will be in trouble if caught.
At the end of the day, nobody wants to be audited by the ATO. Taking a few simple steps can reduce your chances of getting that call, which means peace of mind and saves you from unnecessary stress!