One month into the FY2019 tax season, we’re already seeing key insights into taxpayer claims and deductions, highlighting the importance of understanding how to avoid an ATO tax audit.
The Australian Taxation Office (ATO) reported that nearly 700,000 taxpayers claimed about $2 billion in other expenses during the 2017 financial year. Many of these claims included non-allowable private and domestic items, which the ATO later disallowed.
Expert Tax Assistance at EndureGo Tax
At EndureGo Tax, we take pride in being professional and experienced accountants and tax agents serving #InnerWestSydney, #Ashfield, #Sydney, and #Adelaide. We have helped numerous clients prepare and lodge their tax returns while ensuring they achieve an optimal tax position.
When clients visit us for tax return assistance, we take the time to understand their occupation, explain allowable work-related deductions, and inform them of the evidence the ATO may require during a tax audit. To protect our clients’ interests, we often review invoice evidence to ensure compliance.
Minimizing Tax Audit Risks
After completing a tax return, we compare the client’s total work-related deductions against the ATO’s benchmark. If any deductible items exceed the benchmark, we work with the client on how to avoid an ATO tax audit by adjusting claims and ensuring proper documentation.
ATO Crackdown on Unusual Expenses
Assistant Commissioner Karen Foat recently revealed that the ATO has found and disallowed many unusual expense claims. The ATO penalizes taxpayers who deliberately submit dishonest claims, particularly for large sums. In some cases, penalties escalate to criminal sanctions.
Shortfall Tax Penalties
Shortfall tax penalties range from 25% to 75% of the shortfall amount. This serves as a strong deterrent for taxpayers considering dishonest claims.
Transparency in Individual Tax Returns
When filing an individual tax return, transparency is crucial. The ATO can easily cross-check declared income against claimed deductions and quickly identify unusual expenses. For example, a couple once attempted to claim $58,000 in wedding expenses as a deduction, arguing it was related to an overseas conference. The ATO disallowed the claim and initiated legal action against them.
Understanding tax regulations, making honest claims, and knowing how to avoid an ATO tax audit ensures compliance and protects taxpayers from penalties. At EndureGo Tax, we are committed to guiding clients through the process with professionalism and expertise.
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Another taxpayer attempted to claim child care expenses as a deductible expense, arguing that they needed child care to work and generate income. They listed the expense on their tax return as a child-raising expense. However, this was an honest mistake, and the ATO disallowed the deduction.
This year, the ATO is focusing on deductions for rental properties, particularly travel expenses for residential properties and depreciation expenses for non-fixtures in second-hand dwellings. The ATO is also closely monitoring the share economy. Many people rent out their properties on Airbnb, and in most cases, the platform feeds that data into the ATO system. If you fail to declare this income, you may face penalties.
EndureGo Tax specializes in Airbnb tax returns, rental property tax returns, and small business tax returns. We work with you to understand your business or financial situation, ensuring you maximize your tax position. Call us at 0410 829 900.
