Audit Experiences

From: Duncan M


Would love to hear from people of their experiences with Tax Audits as they relate to Investment Properties..

A recent anecdote from someone described being asked for dates and details of all letters posted in order to substantiate a claim of $6 for postage..

As we come up to the new financial year and the completion of the FY00/01 Tax Return it might be prudent to review our filing systems and financial records in light of other peoples audit experiences..


Regards,


Duncan.
 
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Reply: 1
From: Les .



G'day Duncan,

You've GOT to be kidding !!! Or, if not you, then the ATO has got to be kidding.

$6 for postage - "PROVE IT !!" - yes, of course we should keep all receipts (we'd be stupid not to) but to think that they would seriously ASK to substantiate a $6 claim .... the mind boggles!! I hope they asked for far more than that (otherwise why were they wasting their time - and OUR money ??? )

But, you're right - any experiences with Audits are certainly worth discussion - no matter how STUPID they might seem. The earlier post re "Tax Warnings" mentions that currently around 5% are audited, but that the ATO are looking to increase that figure, so we will all end up facing an audit one day. Hope mine will be as easy to "put to bed" as the one you quoted ....

We can all learn from it - thanks for the post,

Regards,

Les
 
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Reply: 2
From: Dale Gatherum-Goss


Hi

I am a CPA and we had a tax audit on IP's for one of our clients about 18 months ago. I still have the audit questionnaire that the ATO use if anyone would like it . . .

We sailed through easily and without problems largely because we have always insisted on good records being kept for IP's just as you would a business.

The ATO accepted at face value things like postage, stationery and phone calls without question or concern.

I recommend that you prepare for an audit just in case you get that phone call or letter. Be prepared!

I hope that this helps

Dale
 
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Reply: 2.1
From: Apprentice Millionaire


Dale,

Was your client a first time IP investor? I guess what I am trying to find out is if the ATO targets new investors to make sure they follow the rules right from the start.

Cheers
Apprentice Millionaire
(aka Jacques)
 
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Reply: 2.1.1
From: Dale Gatherum-Goss


Hi

It was nice to meet you in person the other day.

My experience is that the tax office do not specifically target first timers, but, more likely people whose percentages are outside of their expectations.

If I may explain a little more . . .

When we do the tax returns, we key information into certain areas of the return that have codes attached to them. The tax office use this information to gather data about certain activities and then to work out who is outside of the averages.

Please understand that they use technology better than most of us and it is the computers and the software that run exception reports of who is outside the norm.

It is then these people who are selected for an audit. This way, the tax office have more chance of finding things that they want to find.

I hope that this helps, but, feel free to ask for more information or for me to clarify my ramblings a little more.

Cheers

Dale
 
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Reply: 2.1.1.1
From: Apprentice Millionaire


Hi Dale,

>It was nice to meet you in person the other day.

Likewise, in particular as you were singled out by Geoff with your example of capital growth!

>When we do the tax returns, we key information into certain areas of the return that have
>codes attached to them. The tax office use this information to gather data
>about certain activities and then to work out who is outside of the averages.

So the ATO has "stereotypes" of people who would be in the norm, and target those who do not fit the mold. Is my understanding correct? In other words, say the stereotype is for a tax payer to hold an average of x properties, if a particular taxpayer has 10 times the average, the ATO will audit.

>Please understand that they use technology better than most of us and it is the computers
>and the software that run exception reports of who is outside the norm.

The other thing is that they set the rules, too!

Cheers
Apprentice Millionaire
(aka Jacques)
 
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Reply: 2.1.1.1.2
From: Dale Gatherum-Goss


G'day!

Yes, you are right. The tax office use the information that we give them to come up with statistical averages both state and nationally.

Again, anyone outside those averages are more likely to receive a please explain than anyone within the averages.

Just a thought, have a look at your last tax return at the rental property schedules and see the codes next to the numbers.

Dale
 
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Audit Experiences LIFE

Reply: 2.1.1.1.2.1
From: Gee Cee Cee


You didn't end up marrying any of them did you?

Gee Cee
 
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Reply: 2.1.1.1.3
From: Apprentice Millionaire


Hi Michael

>I'm sure today they would be far more rigorous in their audit, but would they?? They
>have less resources now than back then.

Less human resources (to use a term that I do not like), but more computer resources, and these are probably more efficient, as Dale indicates.

>If all your paperwork is in order and you ain't cooking the books - does it matter?

True! My only worry would be omissions or mistakes: how do you prove they are genuine and you haven't cooked the books? Many moons ago, I sold a very small parcel of shares, and made a very small profit. Of the order of a $200. I forgot about it when I made my tax return, because I had made other sales of shares where I had much larger profits. The next year, I told my accountant, and he told me not to worry because of the small amount. So I followed his advice. It was a genuine omission. But what if had been $2000, and I had been audited the next year? How would the ATO treat it?

Cheers
Apprentice Millionaire
(aka Jacques)
 
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