At the National Press Club, ATO commissioner Chris Jordan spoke about a change in tactics at the ATO, with a greater focus on work related deduction claims by individuals, representing $22 billion worth of claims made each year. A substantial portion of those claims are “mistakes” or “fraud” he said, although no evidence for this was discussed.
The ATO uses sophisticated data matching and analysis to spot taxpayers who claim deductions that are higher than expected, based on their occupation, income and other factors. This week the ABC revealed unexpected new powers being wielded by the ATO to investigate taxpayers, now including mobile phone hacking capabilities.
The media coverage and ATO statements might serve to make taxpayers afraid of the ATO. Is that necessary?
Liz Russell, Senior Tax Manager at Australia’s largest online tax agent Etax.com.au, says “In a sense, the ATO may be stirring up unnecessary fear among taxpayers – fear of an ATO audit – which could lead people to lower their overall work-related deductions claims.”
If you are being honest with the ATO (and your tax agent) then there’s no need to be afraid of the ATO
A potential problem is that people with genuine work-related deductions may leave them off their tax return, for fear of an ATO audit, without knowing what their audit risk actually is.
Russell says that while the ATO might inspect deductions more closely this year, it doesn’t mean the average taxpayer should be alarmed.
If any taxpayer has a legitimate work-related item to claim, and they have evidence for the expense, then they should claim it. No matter how high or low it is – they should claim what they’re entitled to.”
“Having a big deduction doesn’t mean those people have done anything wrong, it’s just that they’re out of the ordinary so the ATO might take a closer look.”
Russell suggests using a good tax agent may increase the chance people claim everything they are entitled to, while still avoiding ATO troubles, noting that 74% of Australians already use a tax agent.
“Your tax agent should be able to use their expertise to help ensure you’re not missing out on important work-related deductions that put more money in your pocket. Plus, they’re on your side, so if the ATO does take a closer look at your return you’ve got an expert who can go to bat with you and help make your case with the ATO.”