ATO Audits 2016

Small businesses and individuals were placed on notice this past year once the Australian Taxation Office (ATO) cautioned it will be beginning a whole new system of random audits in 2015-16 financial year to claw back approximately $3 billion in lost revenue.

In addition to focusing on deliberate income tax evaders, the ATO does have its sight focused on individuals claiming tax deductions that happen to be extremely high or don’t conform with the permitted tax deductions that associate with their particular industry or area of occupation.

Every year, in excess of 2 million business income tax returns and 12 million individual tax returns are lodged with the ATO, either directly or by using a registered tax agent. The majority of these tax returns are swiftly assessed and processed if they raise no warning signs. Even so, an average of about 350,000 tax returns are recognized by the ATO as comprising errors or omissions.

However, that number is about to get even larger. By using superior software programs and statistics, the ATO will have the ability to easily cross-check all businesses and individual income tax returns against bank-account information along with other transaction sources that report a web-based paper trail of business performed and products purchased and sold. The ATO will be in the position to do this data matching in real-time and something that doesn’t match with the ATO’s rigid parameters would raise red flags.

These advancements imply that each and every income tax return will be under scrutiny and it is getting much easier for ATO to spot claims which are considerably greater than those claimed by individuals with similar professions and employment income.

Staying within the income tax boundaries

Apart from straight-up income tax evaders, where people attempt to escape the ATO’s notice via fake and misleading claims, a large portion of the people approached by the ATO after lodging their income tax returns are found to have erroneously claimed for tax deductions that they aren’t eligible for.

Generally, businesses and individuals can claim an income tax deduction on any expenditure directly linked to income earning activity. The ATO outlines a variety of allowable tax deductions on its website which, based on unique scenarios, range from the examples below:

• Clothing/uniform costs.
• Gifts and charitable donations.
• Home office running costs.
• Interest, dividend and investment deductions.
• Professional costs.
• Self-education costs.
• Equipment and tools.
• Motor vehicle and travel costs.

The ATO website also provides industry and occupation specific deductions, such as health and fitness workers, hospitality and entertainment industry workers, professionals and various others. Click here to access the ATO website for your industry specific deductions.

From the income tax standpoint, every industry is prone to have its very own distinctive characteristics and associated deductions. Do your research to ensure that you do not erroneously claim tax deductions that you are not entitled to.

We use specialised software to ensure that you claim the right deductions, contact our expert tax agents Cranbourne on 1300 300 106 to find out what you can claim in your industry.