Try not to set off the alarm

A few tips can cut the risk of scru­tiny by the tax man

Townsville Bulletin - - NEWS -

EACH year the Aus­tralian Tax­a­tion Of­fice re­veals its tar­gets for this year’s tax sea­son.

While the ATO com­put­ers an­a­lyse all tax re­turns against vary­ing bench­marks, this year work- re­lated ex­penses ( es­pe­cially laun­dry and cloth­ing de­duc­tions) as well as in­vest­ment prop­erty in­come and de­duc­tions will re­ceive closer at­ten­tion than nor­mal.

With the most pow­er­ful com­put­ers in the coun­try match­ing data from just about ev­ery facet of your fi­nan­cial life, there re­ally is no es­cap­ing a tax au­di­tor’s gaze.

The tax of­fice has a scheme to match con­sump­tion data ( in­stead of just in­come) against tax re­turns of in­di­vid­u­als.

For ex­am­ple, they look at those peo­ple who have bought such things as boats, race horses, antiques and lux­ury cars. They then check the tax re­turns of those peo­ple to see if they can “re­ally” af­ford those items. It has turned up some amaz­ing re­sults.

The best ad­vice to es­cape trou­ble: don’t push the en­ve­lope. If you at­tract the at­ten­tion of the ATO with a few small mis­takes, you might quickly find your records be­ing scru­ti­nised top to bot­tom.

So as group cer­tifi­cates start to hit the mail­box, take a sec­ond to set a re­minder for th­ese com­mon tax mis­takes.

MISS­ING IN­COME

For­get­ting to re­port in­come is very easy to do and, thanks to the ATO’s com­pre­hen­sive data match­ing sys­tems, very eas­ily de­tected. Think in­ter­est in­come, short- term con­tract or free­lance work, gov­ern­ment ben­e­fits, bonuses, div­i­dends or any other pas­sive in­come that might have come into your ac­count.

Last year the ATO cross­ref­er­enced tax re­turn in­for­ma­tion against al­most a bil­lion trans­ac­tions pro­vided to it by third par­ties to track down omit­ted in­come and in­cor­rectly claimed off­sets.

Even the records from AirBnB and Uber are given to the ATO, so the “shar­ing” and dig­i­tal econ­omy is caught by the data col­lec­tion pro­gram.

That re­sulted in a huge num­ber of tax­pay­ers get­ting a call from the tax of­fice for dicey dis­crep­an­cies. Don’t be one of those caught this year.

UN­CLEAR EX­PENSE CLAIMS

It is im­por­tant to en­sure all el­i­gi­ble tax de­duc­tions are taken ad­van­tage of to avoid pay­ing more tax than nec­es­sary. But don’t over­step the line. There is plenty of in­for­ma­tion on the ATO web­site and through­out the MyTax pro­gram, so do­ing it your­self is no ex­cuse for ig­no­rance ei­ther.

Be sure to check out any spe­cial de­duc­tions ap­pli­ca­ble to your cir­cum­stances, but don’t go claim­ing things that push the en­ve­lope.

We re­cently read a sug­ges­tion from one “ex­pert” claim­ing women could buy a $ 2000 handbag and claim it as work de­duc­tion if it car­ried their lap­top. While claim­ing a com­puter bag is de­ductible, we reckon claim­ing a de­signer handbag pushes it a bit far – a too- smart- by- half move that could get you into trou­ble.

As al­ready men­tioned, it only takes one or two lit­tle fudges and sud­denly the tax man will be go­ing through your records with a fine- tooth comb. Don’t take the risk.

NOT LODG­ING

This sounds a bit ob­vi­ous, but there are lots of peo­ple who get be­hind in lodg­ing their tax re­turns and are then too scared to catch up. It’s worth not­ing that tax agents have a bit longer to get re­turns in, so if you can’t af­ford your tax bill or are re­ally late it may be worth ap­proach­ing a pro­fes­sional to lodge for you.

Re­mem­ber, fines ap­ply if you miss the end of Oc­to­ber dead­line, but the ATO is usu­ally pretty le­nient in ap­ply­ing th­ese and not such a big bad guy.

The tax of­fice is al­ways will­ing to ne­go­ti­ate pay­ment plans for out­stand­ing tax and pro­vide help to those in need, so pick up the phone and get your tax fil­ings back on track this year.

RECK­LESS RECORD KEEP­ING

The num­ber of times that I’ve had peo­ple say “I’m get­ting au­dited, what do I do?”, fol­lowed by the rev­e­la­tion their records are a mess or even nonex­is­tent, as­tounds me.

If there is one thing you do to stay safe at tax time, keep bet­ter records.

Not only does good or­gan­i­sa­tion make any au­dit a much eas­ier process, but it helps you un­der­stand your fi­nan­cial po­si­tion bet­ter, iden­tify ex­tra de­duc­tions and ul­ti­mately get your­self in a bet­ter tax po­si­tion.

So while you’re de­tect­ing de­duc­tions this year, also spend some time mak­ing sure you’re do­ing the right thing by the tax man too.

It can save a lot of time, trou­ble and money down the track.

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