Update Friday 30 October
The Australian Taxation Office (ATO) is gearing up for another tax crackdown. Australians are officially on notice to have their receipts ready for inspection. So what happens if you get audited?
Each year, the ATO issues warnings, telling people to keep appropriate receipts and other documentation, particularly for what they call “other work-related expenses”. Here are some things to consider if you’re feeling a little anxious.
What are legitimate work-related expenses?
In order for a deduction to be a legit work-related expense, it needs to satisfy three criteria.
You must have paid for it and not been reimbursed
It must be directly related to earning your income and not a private expense
You must have a record to prove it
If you’re in doubt about what’s a legitimate claim the ATO has a list of what’s OK and what’s not. For example, if you’ve been claiming car expenses for the trip between home and the office, there are some situations in which that’s OK and others where it’s not.
Record keeping is key
If you claim business tax deductions, you’ll need to keep records to substantiate what you claim. Under tax law, your records must explain all transactions and be:
in writing, either on paper or electronically
in English, or in a form that we can readily access and convert into English
kept for five years (although some records need to be kept longer)
For more information, refer to the ATO’s information on:
What Work Expenses are the ATO targeting this year?
Every financial year, the Australian Taxation Office (ATO) targets certain work expenses that people attempt to claim erroneously.
How does an audit work?
If the ATO decides to conduct an audit, they’ll call and make a time to see you, providing an agenda for what they’ll be discussing and what they’ll need from you. However, while they do define the scope of the audit at the start, if they spot anything untoward, the receiver has the right to expand the breadth of their investigation.
The entire process is documented and the ATO provides everything they do in writing. That’s important as you won’t get official correspondence regarding an audit over email.
Alternately, the ATO has rights to conduct audits electronically through the e-Audit process. This is where the ATO uses their rights to examine electronic records they hold in their systems and look for items that raise their attention.
When it comes to communications from the ATO, they say:
The ATO uses a variety of methods to engage with taxpayers or their agents, and in some circumstances they will contact a taxpayer by letter, phone, email, or SMS. If you receive a call, letter, email, or SMS that you weren’t expecting, you can check whether it is genuine through us, or by calling the ATO scams hotline on 1800 008 540.
If you're a contractor or a consultant, your personal services income may affect the deductions you can claim.
Want advice for your particular circumstances? Please contact one of our team for more information.
We would like to welcome Carol Johnstone back from a short time away.
Carol is our Accountants Assistant and has 30 years experience in bookkeeping specialising in MYOB and Xero.
It is wonderful to see you back with the team.