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ATO hit lists

May 05, 2011

Every year, based on an analysis of previous returns, the ATO issues a 'hit list' of occupations that will be targeted for close attention regarding work-related expenses.

The ATO's tactic of putting the spotlight on particular groups has proven successful in past years. When the ATO targets particular industries, its tax collection improves by 22 per cent.

Generally the ATO looks closely at a range of claims for deductions including expenses for motor vehicles, selfeducation and travel. It also looks at tax returns from previous years and identifies particular occupations to put under the microscope where:

  • average amounts of claims are high
  • there is an increase in the number of people making claims
  • there are a lot of people making claims for the first time.

In the spirit of 'prevention is much better than cure', the ATO uses that information and writes to people in those occupations. It sends information outlining common mistakes made in claims, and provides help on how people can get their claims right in the subsequent year's tax return.

While the natural tendency of people in targeted occupations is to reduce the amount of their claims out of fear, if you are genuinely entitled to a legitimate tax deduction then you should claim it. By all means, go to the boundary but not over it. If you are concerned about your claims then you should seek advice from a tax expert.

The first step in a subsequent ATO investigation usually involves a 'please explain' letter requesting further information about your tax return.

Usually a person is given 28 days to respond and the ATO might also ask for copies of receipts and other supporting documents. Only if the matter remains unresolved after this is a face-to-face meeting required.
You will be given lots of opportunity to explain yourself. But the penalties are significant so it's best to have all your affairs in order. Penalties start from a minor adjustment to your return if there was a genuine mistake or misinterpretation of the law, and escalate to severe fines.

If you make a downright fraudulent claim for say $20 000 and there is no substance at all to it the ATO can charge up to 90 per cent tax in penalties, plus an interest penalty on top of that.

The ATO has outlined some simple rules for getting your work-related expenses claim correct:

  • you must have incurred the expense in the year you are claiming for
  • the expense must be work-related and not private
  • receiving an allowance from your employer does not automatically entitle you to a deduction
  • if your claims total more than $300 you need written evidence

Penalties that the ATO can charge as a percentage of any tax shortfall are 75 per cent for intentional disregard of a tax law; 50 per cent for recklessness; and 25 per cent when you don't take reasonable care, if your case is not reasonably argued or if you disregard a private ruling by the ATO. These penalties are increased by a further 20 per cent of the base amount if you do not cooperate and make it difficult for the ATO when looking at your affairs (for example, the penalty for intentional disregard of a tax law when
you don't cooperate becomes 90 per cent, being 120 per cent of the base penalty of 75 per cent). The Commissioner encourages voluntary disclosure so if you confess your sins during an audit investigation they will reduce the base penalty amount by 20 per cent. If you advise of any errors prior to any audit activity, then the base penalty amount is reduced by 80 per cent.

Tags: 101 WaysDeductionsPersonal tax

Author: Mr Taxman


"Here is the taxman's hit list for 2011 "

By: Mr Taxman on Jun 16, 2011 3:12AM

"When i'm doing my tax return it is often rushed (which I hope to change in the future) but the whole hanging on to receipts for 5 years is a burden as often moving etc. I cannot remember was I was doing 5 days ago let alone 5 years. I wonder if we could put pressure on the ATO to allow us to upload our proof of receipts so it's on their system. Furthermore, is there anything stopping you posting a copy of your receipts in the year? I am just worried that they're going to ask for a receipt and I lose it from 4 years ago. "

By: Adrian on Oct 09, 2012 5:15AM

"Might be an idea for you to scan your receipts & keep a copy on your computer if you are fearful of losing them. The ATO would return anything that you mail them - perhaps not a good strategy anyway if you give them the opportunity to scrutinise your claims if they are somewhat open for interpretation."

By: Mr Taxman on Oct 09, 2012 8:19AM

"Received an email saying 2013 tax return is under investigation and saying to open the attachment which is a zip document. doesn't use my name. Is this a scam??"

By: Wendy on Mar 18, 2014 4:51AM

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