ATO assistant commissioner Karen Foat said the Tax Office contacts around 2 million taxpayers each year to clarify information on their tax return, but said there was nothing to fear if they had claimed what they were entitled to.
“If we do decide to look a little closer through an audit, you can expect that we will contact you or your tax agent to make further inquiries,” Ms Foat said.
“The sort of information we may need from you or your agent will vary depending on the circumstances. Often, we are just looking for an explanation and documentation on a deduction.
“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.”
With an estimated tax gap of $8.7 billion, Ms Foat said the ATO could not afford to turn a blind eye to those who were overclaiming even by a little.
“Our biggest tip is to ensure you work with us from the beginning and provide the information required to help us resolve any concerns and finalise the audit,” Ms Foat said.
“We understand it can be frustrating to dig up old receipts and information, but it is necessary. A small amount of overclaiming by a large number of people adds up to $8.7 billion less each year for essential services; we can’t turn a blind eye to that.
“If you think you’ve made a mistake or an error in your tax return, the best thing you can do is to ‘fess up’ as soon as possible.”
The ATO’s latest warning comes after taxpayers rushed to lodge early this year to claim the increased low and middle-income tax offset, with the agency warning that early lodgers could be susceptible to making errors because of the lack of prefill data.
Ms Foat said the best way to avoid a potential audit and subsequent penalties was to come clean sooner rather than later.
“Whether we apply penalties will depend on your behaviour. We see behaviours ranging from genuine mistakes through to deliberate overclaiming. In the most extreme cases of intentional fraud, we may seek to prosecute through the courts,” Ms Foat said.
“If the ATO has been in contact to review your claims and you know you’ve overclaimed, 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.
“The best way to ensure a smooth audit process is engage with us early and to keep accurate records.”
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.