Are the rumours true?
Heard any good ATO rumours this year?
There are many rumours surrounding tax time that may leave many a taxpayer scratching their head in confusion. Here we shall have a look at some of them to help you stay ahead of any curve balls the ATO may or may not throw this year.
Does the ATO have a ‘hit-list’?
The general answer to this is…Yes.
Every year, the ATO identify occupations or deduction items in tax returns and select a chosen few for a ‘Review’. Not to be confused with an audit, a review is generally where the ATO identifies that a taxpayer may have more deductions in their own tax return than the average for that occupation and will request the taxpayers prove their deductions.
The ATO may look at specific deduction areas, with highlighted areas this year including Laundry Deductions and Motor Vehicle Deductions.
Get Ahead…ensure you are listed with the correct occupation on your tax return, ensure your deductions can be substantiated in the event of an ATO review.
Can the ATO see how much interest I have earned?
When you open a bank account, the bank requests your Tax File Number (TFN), right?!
While providing the TFN is not compulsory, if the bank does not have this on your records, they will withhold earnings on your interest at the highest tax rate. To receive some or all of the withheld amount back in your pocket, you must declare the interest income on your tax return. Interest is included in your income and taxed at your marginal tax rate.
If you neglect to include interest income in your tax return, the ATO may send you a ‘please explain’ letter or may amend your tax return to calculate the difference.
Get Ahead…contact your bank for a summary of the interest earned on all of your bank accounts for the year, include these in your tax return.
The ATO can see everything bought and sold
This is a… Yes and No.
While most electronic transactions can be ‘seen’ by the ATO, the cash economy can sometimes operate under the ATO’s radar. Don’t get excited and move everything to cash though, the ATO have developed ways to capture some of these transactions.
Businesses must report payments to contractors in or out of the cash economy, the ATO uses this information to confirm if payments received by contractors are reported as income and therefore, subject to tax.
The lodging of Business Activity Statements and Employee Payroll reports can also be used by the ATO to crosscheck income and expenses to businesses and individuals.
Large cash deposits to bank accounts may also raise eyebrows with the ATO.
Get Ahead…don’t think that because you work in the cash economy the ATO can not get to you. Keep records of all work/business related cash payments and receipts to ensure you are meeting your taxpayer obligations.
Should I reply to this email from the ATO?
The answer to this one… No, and STOP.
The ATO are not in the practice of emailing people for a ‘please explain’. If you have received an email from someone claiming to be the ATO, report this by forwarding the email to ReportEmailFraud@ato.gov.au
Should they require further information, the ATO will usually call either you, your tax agent, or send out a letter.
Get Ahead….If the ATO do call you, do not provide any information and contact Wall Business Services immediately to confirm if this query is legitimate.
In a nutshell…
There are many rumours surrounding the ATO, and always a layer of bad press. The truth is, there are many rules and regulations that we as taxpayers must follow, and the job of the ATO in part, is to ensure these rules are followed. The people from the ATO are for the most part, just doing their job to ensure the tax rules are followed.
How should you get ahead of the rumours?
- Keep your records…I know we say this a lot, but this is very true. This will ensure that you can substantiate the income and deductions should the ATO send you a ‘please explain’.
- Confirm you are in the right job…check the line near the top of your tax return, to make sure you are listed with the correct occupation. This enables your circumstances to be compared with others in your field.
- If in doubt…contact Wall Business Services. If the ATO have tried to contact you via phone or mail, we can check on what they are asking and advise you of what to do next.
- Don’t ignore the warnings…claim only what you have actually incurred in your job. The ATO have many eyes and for the sake of an extra couple of cartons in your tax refund, is it really worth pushing the ATO envelope?
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– Karen Patterson