ATO using some interesting tactics

[coastymike]

Had 4 clients receive letters recently from the ATO in relation to their 2012 returns.

Basically letter says you may have incorrectly made claims to your borrowing expenses. They then show a schedule of the borrowing expenses claimed and show another table by the amount they intend to adjust. They basically take away all thr borrowing costs.

They give you 28 days to respond or they will presume your claim is wrong. Doesnt mean you are wrong but have to provide evidence of your calculation.

Not exactly a kosher way of doing things in my opinion.

 

[pieman]

Greeaaaattt sounds painful.

Were these clients adventurous at all?

 

[datto]

A investor must be entitled to claim some borrowing costs. Usually you claim on fifth per year.

Without auditing the records I can't see how the ATO can make such an assumption.

I know that if you omit bank interest the ATO will send a letter advising of intended adjustment, but this is different.

 

[coastymike]

Nope they havent been adventurous at all. Legitimate claims over the 5 year period. All able to be sustantiated.

Think they are just fishing.

 

[Jamie M]

Had 4 clients receive letters recently from the ATO in relation to their 2012 returns.

yep - got me one of those too!

It's a pain because now I have to wait on hold for an hour in order to explain it was legitimate - and no doubt I'll then have to dig out old loan offer docs as proof.

Cheers

Jamie

 

[datto]

Yeah, once they realise that they are wasting their time they will soon drop it and try something else.

 

[coastymike]

Jamie

Yep you need to fax through the original loan documentation showing the lmi etc along with your amortisation schedule. If not done within 28 days they will adjust and then you need to go through the objection process.

 

[Jamie M]

Jamie

Yep you need to fax through the original loan documentation showing the lmi etc along with your amortisation schedule. If not done within 28 days they will adjust and then you need to go through the objection process.

Thanks Mike.

That's great advice - really appreciate it.

Cheers

Jamie

 

[Paul@PFI]

Mike - Since we spoke Friday about this my mail has arrived.

Its a bizarre letter. It presumes there IS an error which is how you described it to me. Have to say that's very unusual for the ATO to be some adamant. Its normal for an audit outcome but not for an initial contact. They seem very confident but I'm not so sure its that easy to just deny 100% of the claim. The schedule attached actually proposes to reduce the total deductions claim at label 21U from $6512 to $4415 as an example. The difference is 100% of the borrowing expense claimed. So they must have obtained some borrowing expense information from lenders. I'm just not sure how they can make an assumption that it is 100% non-deductible.

However its prone to a stack of errors :
- Borrowing costs relating to more than one loan
- Borrowing costs that the lender didn't directly facilitate : eg Mortgage discharge fees as a disbursement or a legal expenses cost paid directly.
- Refinance eg : Refinance in 2013 with there years remaining would bring fwd the deduction and also allow new costs to be claimed for the next 60 months.

Would be nice if the ATO described the loan facility it relates to. When they issue the letters for undeclared interest income they indicate account numbers. Would help here no end.

 

[Paul@PFI]

One was an easy response. Notice of Assessment was issued two years and ten days ago. Taxpayer has simple affairs and is subject to a two year amendment period.

Next one is a property sold three years into the loan triggering payout costs. They acknowledge the $200K gain that lead to $70K of tax but not that borrowing expenses can be triggered by the sale. However despite me holding 100% of documents to support the deduction I must write to the ATO. Adding further cost.

Call to ATO indicates they are copping a heap of flax over this matter. I'm sure they will recover a load of money from this from taxpayers who make minor errors, who have since refinanced and have no access to the older documents from 2009 and from those who make simple errors - The guy I spoke to said most errors appear to be based on claims over 5 years rather than 60months, including stamp duty on the purchase rather than on the borrowing and claims for costs in a single year.

 

[The Y-man]

Call to ATO indicates they are copping a heap of flax over this matter.

Hope it's flack and not flax! Flax won't hurt as much

The Y-man

 

[coastymike]

At least the ATO will have regular bowel movements

 

[Peter_Tersteeg]

I've identified two significant threats to my business that that I've got very little power to mitigate. The ATO and ASIC.

In both cases, they can change a law, run an audit or perform some similar action which could have a significant and debilitating affect on businesses and individuals, even when everything has been done correctly in the past. Simply fighting the charge given the basis of guilty until proven innocent takes time, money and only serves to further line the pockets of accountants and lawyers.

People shouldn't have to pay for audit insurance as protection. I don't imagine it will be easy to renew after the first claim.

A letter like this should be accompanied at a minimum by specific information regarding the error to be addressed and workings as to why the believe it's incorrect.

"Fishing" is illegal in the online world, why is the government allowed to do it?

 

[Paul@PFI]

Hope it's flack and not flax! Flax won't hurt as much

The Y-man

Flax is what was fired into the air at bombers in WW2. http://en.wikipedia.org/wiki/Flak_tower

You suggesting the ATO throw seeds. ??

 

[Paul@PFI]

I've identified two significant threats to my business that that I've got very little power to mitigate. The ATO and ASIC.

In both cases, they can change a law, run an audit or perform some similar action which could have a significant and debilitating affect on businesses and individuals, even when everything has been done correctly in the past. Simply fighting the charge given the basis of guilty until proven innocent takes time, money and only serves to further line the pockets of accountants and lawyers.

People shouldn't have to pay for audit insurance as protection. I don't imagine it will be easy to renew after the first claim.

A letter like this should be accompanied at a minimum by specific information regarding the error to be addressed and workings as to why the believe it's incorrect.

"Fishing" is illegal in the online world, why is the government allowed to do it?

The Taxation Administration Act gives the ATO powers to do almost anything. They can walk into your house and sit down if they have the right authority in their possession. And you cant obstruct them. Sure they may be accountable and taxpayers have right to appeal, object, ombudsman etc but they can **** you over in the process. One fortunate thing - ATO has no power to make or change laws. They can ask Treasury but it rests with Government (executive) and Judiciary. That's part of the issue -

The Judiciary costs a lot to use and Government spends a lot and asks for more and more blood from each stone they squeeze. Taxpayers never win because they are all spending OUR money. Client of mine fought a s353-10 notice that was daft. She was being prosecuted for a criminal charge. She defended it and even won 100% of costs. She was left $20K out of pocket and was innocent.

 

[Ausprop]

They can walk into your house and sit down if they have the right authority in their possession.

That actually happened to a mate of mine

 

[datto]

Section 263 gives duly authorised officers full and free access to all buildings, documents etc. And you must also provide reasonable facilities eg table, chair, photocopier and coffee machine.

 

[Terry_w]

Section 263 gives duly authorised officers full and free access to all buildings, documents etc. And you must also provide reasonable facilities eg table, chair, photocopier and coffee machine.

Coffee? I don't think I would go that far
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s263.html

 

[datto]

OK they can supply their own coffee machine.

 

[Peter_Tersteeg]

We only have instant coffee. They're welcome to it.