Being audited by the ATO is not on anyone’s wish list. It can be time-consuming, stressful and the worst case scenario could end up costing you money in extra tax, penalties or interest. If you’ve made mistakes in your return, failed to disclose information or misrepresented your financial situation, you could become a target for a review or audit.
There are no hard and fast rules for who is audited, but each year the ATO releases information on its targets for that tax season.
One thing that remains consistent, however, is the ATO’s data benchmarking, which means your tax return is compared to other similar tax returns, to identify any red flags. So if your expenses or deductions are exaggerated, it’s likely this will be picked up when your return is lodged.
Here are 4 tips for minimising your chances of being audited:
1. Lodge your return on time
A good compliance history is a big tick against your name. Try to ensure you lodge your return on time each year. Not only will this help with the accuracy of your returns (no last minute ‘fudging’ required!) but it will also demonstrate to the ATO that you take your tax seriously. If you can’t afford your tax bill or are late for any reason, consider talking to a tax professional.
2. Only declare deductions you’re entitled to
This seems like an obvious one, but avoid stretching the truth or exaggerating your expenses or attempting to claim deductions for items you’re not actually qualified to claim in your role. Similarly, if you’ve been reimbursed for an expense by your employer, you cannot claim it as a deduction. The ATO looks very unfavourably upon those who make unsubstantiated claims, so make sure you’re only including the items you’re supposed to, or it could come back to bite you.
3. Double check your maths
More than 350,000 Australians are contacted each year regarding errors in their return. If the details of your return don’t add up, you put yourself at risk of being audited. It’s always worth taking the time to engage one of our tax professionals to assist you.
4. Keep good records
While keeping and categorising your receipts may not necessarily save you from being audited, it will help ensure you have an accurate tax return each year. It will also save you energy and stress if you are audited, as one of the first things you’ll be asked is to provide access to your records.
Remember - if your tax return is honest and accurate, you have nothing to fear! Keep good records and if you are audited, it will ensure the process is as smooth and pain-free as possible.