The Australian Tax Office (ATO) is constantly committing more resources to checking tax returns and using modern technology to help nab offenders. So be prepared – the tax office is smarter than you are!
A vital tool for the ATO is data matching software – this compares interest, dividends and other income with information from bank accounts, investments, companies and government agencies. If your tax return doesn’t match the ATO’s records you may be asked to explain. This doesn’t mean that your return is wrong, just that it is “different”.
There are penalties for errors beginning with having to pay interest on any tax shortfall through to prosecution for making misleading or false statements or falsifying records with the intention to deceive a tax officer.
Where your tax agent has made the error, you may be able to sue them for negligence. However, you are ultimately responsible for your tax return and you would need to demonstrate they gave you faulty advice. To overcome this, accountants require clients to sign an authority taking full responsibility for their own tax return and the information provided.
If your tax return is audited, it will usually start with a request for more information – substantiation of expenses, clarification of deductions and so on. You need to be co-operative and lodge the material within the deadline. It won’t go away if you ignore it!
The ATO has extensive powers to access premises, to examine and make copies of documents so resistance is useless. However, the Taxpayers Charter requires ATO staff to undertake their enquiries “fairly and reasonably”. The ATO has significant resources to pursue taxpayers it believes have done the wrong thing and will use top accountancy and legal firms to support its efforts.
If you normally complete your own tax returns, you may want to get the advice of a tax agent to help you through the audit process. They will be familiar with the process and will ensure your situation is properly presented.
You want the audit to be as painless as possible. The best tactics are to keep your emotions in check and co-operate – if you haven’t done anything wrong there’s nothing to worry about.
For more information, contact us at Leenane Tempelton on 02 4926 2300 or email success@leenanetempleton.com.au
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