Over one out of two taxpayers said they have left out a claim in their tax return because of uncertainty and fears of being audited by the Tax Office, new research by H&R Block has shown.
The study comes after ATO data showed that close to $70 million in revenue was retained in 2017–18 thanks to risk messaging in tax agent pre-fill reports and “nudges” in myTax, warning agents and self-preparers that their work-related expense claims were higher than expected.
Speaking to Accountants Daily, H&R Block director of tax communications Mark Chapman said the ATO’s public messaging on work-related expenses was likely to be having an impact on taxpayer claims.
“The ATO’s own figures show that the amounts claimed for work-related expenses have fallen a bit, so I think taxpayers are certainly reducing their claims,” Mr Chapman said.
“What’s harder to gauge is whether the claims not being made are the ones that weren’t legitimate in the first place.
“Where I think there is likely to be some movement is among those taxpayers who prefer to lodge themselves through myTax on the basis that they think they can get away with claiming items a tax agent would warn them off claiming. A lot of those taxpayers are now seeing ATO warning messages before they lodge, others are getting ATO letters advising them that their claims are high and are perhaps moderating what they claim.”
The ATO’s public focus on work-related expenses comes as its Individuals not in business tax gap report found that such claims were a main component driving the $8.76 billion gap.
However, Mr Chapman believes it will be “business as usual” for tax agents who have a firm grasp of tax laws.
“I think tax agents are doing what they always do: advising clients what they are entitled to claim within the law. So, it’s business as usual,” Mr Chapman said.
“We do know that there are some agents who have done the wrong thing in the past who are now being picked up by the ATO, and that’s a good thing.
“However, the majority of agents have always worked hard to get the right balance between doing the best for our clients within the law and stopping clients getting into trouble by claiming for things they are not entitled to.”
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Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.