All this knowledge that we have gathered comes from years and years of experience, and something that you can’t just train someone on:

1.       Wrong codes on the tax return – the most common error, that almost automatically drags you into audit hell.

Codes? What codes? To the undiscerning taxpayer, this doesn’t even exist. You just assume that the accountant has it all under control, and as long as the numbers look right, and the refund is what you expected, the rest must all be correct. Right? Wrong.

There are codes that need to be entered in different places, to indicate certain information to the ATO. A very common example where this is handled incorrectly is claiming for motor vehicle expenses.  

2.       Claiming train rides to work – especially if your occupation is one that is typically office based. If you are an office clerk, and you are claiming travel - be warned!!

3.       Holiday homes – ladies and gentlemen, this is old news to the ATO. They know the holiday hot spots, and they can see if you haven’t rented it for the full year, but are claiming the deductions for the full year. If you, or your family and friends have stayed in your holiday home throughout the year, the expenses that you claim must be adjusted.

4.       Spousal splitting – we had a new client move across to us, where the property was owned jointly, but the husband claimed 100% of the property, because it was more tax effective. The property investment ownership % must be correct on the tax return, and you must claim the right % in your tax return. If you do get caught intentionally participating in this type of arrangement, the penalties are high. Data matching technology allows for this to be picked up quite easily – don’t risk it

5.       Claiming for repairs after the property was just purchased – the ATO pays closer attention to the details on your tax return in the first year – any large repair claims in year 1 will most likely flag you for an audit. Get proper advice from your accountant on this, and make sure you have proper paper trails.

6.       Double dipping – if you have been reimbursed for an expense by your employer, unfortunately, you cannot claim it again on your tax return. Of course no one would know, but if you do get picked for an audit, you will have to show how it was paid for. Double dipping also incurs harsh penalties.

7.       Lodging your tax return, before the ATO has updated the prefilling report for your tax agent – the ATO pays very close attention to tax returns that are lodged in the first 2-3 weeks in July. Why? Because most taxpayers will not have access to all tax information yet, or their PAYG Payment Summary, so it is a high chance that the figures lodged are estimates.

8.       Claiming excessive expenses – if your income is $40,000, but you have claimed $21,000 in work related deductions, we would anticipate an automatic flag for an audit. There has been an instance where a taxpayer had changed roles within the same industry, from one incurring little tax deductions, to one incurring large but legitmate tax deductions, and this triggered an audit, because of the anomaly. The ATO looks at your history, any variations, and then they want to know whether it is legitimate!

It is important that you work with professionals that know the way the system works, and that are there to look out for you. Audits are painful and stressful for clients, and best avoided where possible.