In case you missed the cues: the ATO is in crackdown mode. Its pre-end of financial year communication caused a surge in people filing their tax returns early this year, prompting the ATO to subsequently warn people to ensure they ‘get their returns’ right rather than rushing them.
By July 14, according to reports, 1.3 million Aussies had already filed their 2019 tax returns, up by 600,000 filed at the same time last year — a result of Prime Minister Scott Morrison’s tax cuts as well as strict warnings from the ATO that late returns would attract penalties.
Over the past couple of years, the ATO has implemented a number of measures for small business to ensure that payments are made on time and that returns are accurate.
There are significant penalties for non-compliance.
But across the board, from business to individuals, the prediction this year is that there will be a significant increase in the number of audits, too.
“The ATO has explicitly said that it wants to close the $8.7 billion ‘tax gap’,” says Paul Rattray of Paramatta-based tax accountants, ATB Partners.
“And it has been given additional government resources to see this through. This will mean that hundreds of small businesses and individuals could potentially receive letters regarding any kind of discrepancy.
We’ve looked over a list of things the ATO has mooted as being in the spotlight. Some of them seem inconsequential, but the message is pretty clear – everything is going to be looked at in detail. And the ATO has already indicated that it’s likely to significantly increase the number of audits compared to those conducted in previous years.”
Work-related claims for things like dry cleaning and car expenses are likely to come under scrutiny, along with investment property deductions and earnings from cryptocurrencies and sharing economy platforms, such as Airbnb and Uber.
“The ATO can now cross-match data with third-parties; they’ve even been known to use social media. This gives it a lot more information for checking returns and the legitimacy of claims. People need to take care.
Once upon a time, if you were unsure about a deduction you could get away with a sort of ‘make it up and then apologise later’ philosophy. That doesn’t work anymore. The ATO was once a lot more flexible than it is now,” explains Paul.
Expenses expected to be in the spotlight this year:
“The advice is plan for tax, keep all records and receipts and make sure you can substantiate all claims,” says Paul.
“Now’s also a good time to consider getting a tax agent or an accountant if you don’t have one – tax rules have changed and tweaked over time and the ATO has indicated that a new era is here and there is limited tolerance for error.”