Thousands get ATO tax refund queries
SOPHISTICATED new datamatching technology used by the ATO is seeing more taxpayer errors being flagged than ever before, experts warn.
Thousands of Australians have received letters from the ATO this tax period after its high tech analysis found inconsistencies in their lodged returns. The letters identify the potential issues and outline any adjustments intended by the tax office.
Etax senior tax agent Liz Russell said most of the time, the letters are the result of innocent mistakes.
“Taxpayers tend to receive these letters off the back of common mistakes,” Ms Russell said. “For example they forgot to include one PAYG summary after switching jobs during the year, or they didn’t realise that bank interest, allowances and Centrelink payments are classified as income and must be declared on your tax return.
“This year we are seeing more data matching letters being issued, but that doesn’t mean more people are doing the wrong thing. The ATO’s latest technology helps it cast a wider net and catch more errors or unusual deductions claims.”
Should a letter be received, it is important to be proactive, or risk losing money.
“The ATO may conduct an audit on a taxpayer’s return anywhere from one month to two years after it was lodged and taxpayers typically have two to three weeks to respond,” Ms Russell said. “Once you receive a letter, jump straight on the phone to your tax agent and get advice on what to do next.
“If you bury your head in the sand and do nothing, the ATO will make an adjustment based on what it thinks. They can adjust details and remove deductions they’re suspicious about. This could end up costing you hundreds, if not thousands of dollars.”
Taxpayers with an agent, their accountant for example, may benefit from their ability to communicate and deal with the ATO on their behalf.
“That could be the difference between whether you get a penalty or a refund,” Ms Russell said.
If a taxpayer can produce evidence, such as a PAYG statement summary, private health statement or bank statement for example, the ATO may not follow through with any adjustments.
If no evidence is available, the ATO may require excess money to be paid back.
“If the ATO determines the taxpayer failed to take reasonable care, was reckless in completing their return, or intentionally disregarded tax rules, it may issue a penalty,” Ms Russell said.
Such penalties could include 25 per cent of the amount owed in the case of failure to take reasonable care; 50 per cent for recklessness or 75 per cent for intentional disregard; though these penalties were completely at the ATO’s discretion, Ms Russell said.