When the Tax Office calls

By Steve Marsten

Many Australian taxpayers are likely to receive some ominous-looking letters this year as the Tax Commissioner cracks down on incorrect claims. If you receive one - what ever you do - do not ignore it!

The Australian Office (ATO) has the power to remove deductions and change details that it thinks appear suspicious. They tend to take the approach that “taxpayers are guilty until proven innocent”.

Often we don’t realise that the ATO could audit your return anytime from one month to even several years after it is lodged. They then give you between two to three weeks to respond to an ATO letter, so it’s important to take action as soon as a letter is received. Don’t hesitate to obtain good professional advice on what to do next.

The ATO has access to vast data matching technology to scrutinise suspicious claims and will send data matching letters to the taxpayers in question, querying suspicious entries and outlining the changes it plans to consider.

The fact that more Aussies are receiving these letters says more about the ATO’s improved technology than the number of people doing the wrong thing.

However, the ATO does get it wrong from time to time. Hence for taxpayers who disagree with the ATO’s concerns, there are some steps that can be taken. Often talking to your tax Agent will assist formulating an action sheet to rectify or provide necessary evidence to fix the problem.

Evidenced offered to the ATO can be like a PAYG statement summary, private health statement or bank statement, and deductions can be proven through receipts or supporting records like logbooks.

Once the ATO has the evidence, it will decide whether to alter the return and taxpayers will receive another notice of assessment if the office decides to follow through with the changes.

However, if the taxpayer can’t back up their income or deduction claim, the ATO will consider whether the taxpayer took reasonable care when completing their return when deciding on the penalty.

Often there won’t be a penalty when an innocent mistake is made however, if the mistake resulted in a larger tax refund than the taxpayer is entitled to, then the ATO will expect you to repay the surplus amount, and potentially interest too.

In situations where the ATO determines that the taxpayer did not take reasonable care, was reckless in completing their return, or intentionally disregarded tax rules, a penalty might be issued in addition to repaying any overpayment and interest. It important to take particular note of what your tax professional is advising you.

For more information on the ATO and your rightful claims call the team at UHY Haines Norton on 4972 1300.