- The Australian Taxation Office (ATO) has issued a warning as it prepares to examine 2 million tax returns this year and commence auditing.
- From comparing your claims to others in similar circumstances, to “hoovering” up data from third-parties, the ATO actually has a lot more information on you than you would expect, Mark Chapman told Business Insider Australia.
- If audited, assistant commissioner Karen Foat advised taxpayers to cooperate and be up front about any mistakes they may have made to avoid harsh penalties.
With the majority of tax returns still yet to be submitted, the Australian Taxation Office (ATO) is talking tough to taxpayers.
ATO assistant Commissioner Karen Foat has revealed that the ATO is already in the process of contacting two million Australians for clarification on their returns this year.
“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,” she said in a release.
The ATO spends much of its time trying to scare taxpayers straight, and most people underestimate the tools it has at its disposal.
“People would be shocked to learn just how much of their data that the ATO hoovers up. It knows a lot more about you than just the information you provide,” tax communications director Mark Chapman told Business Insider Australia in a previous interview.
“It collects information from a bunch of outside sources, like banks, real estate agents, employers, and from the sharing economy with things like Uber, and compares it to what you claim each year.”
That means, according to Chapman, that in many cases the ATO knows what you’ve done almost as soon as you’ve done it. Even if it doesn’t it has a whole range of tools with which to test the financial picture you try to present to it.
When you submit your claim, the ATO uses technology to automatically compare taxpayers to others in similar occupations in neighbouring areas and with similar salary levels to flag any irregularities. The ATO then begins contacting people to clarify claims and begins issuing audits where it thinks there may be some major discrepancies.
“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,” Foat said.
“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.”
Unsurprisingly, there are enough dodgy claims made every year to keep the ATO busy.
“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,” Foat said.
While it audits far less than 2 million people each year, its process can be thorough, checking with third-parties such as your employer to check whether or not work expenses have been reimbursed. Its advice is simply to cooperate with the tax office.
“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,” Foat said.
If you’ve been caught out lying to the ATO, you can expect to be swatted with a fine and potentially even a conviction depending on the severity of the misleading claim.
In June this year, for example, a Queensland woman was convicted on three counts of making false and misleading claims on her return for consecutive years. Despite having been warned by the ATO repeatedly, she continued to try to claim equipment that had been supplied by her employer as well as charitable donations that weren’t made to a charity. In total, she managed to extract $45,000 she wasn’t owed from the ATO.
“In addition to repaying the refunds, in June 2019 she was ordered to pay a fine of $3,000 and was penalised an additional $20,000 and court costs,” the ATO said.
While that’s an extreme case, it does give you food for thought next time you consider stretching the truth on your return.