Tax Audit

[Brenda Irwin]

I was wondering what triggers a tax audit?

Is it your alphabetical surname?
Is it your tax file number?
Is it that you are making too much loss over a long period?
Is it that you are not paying much tax?
Is it that there is a noticable change in you tax returns? ie larger turnover of moneys in going and out going.

If you are paying tax, does that add any indemnity against being audited?

Cheers Brenda

 

[Gill Bates]

Only a very general answer.
My understanding is they have "profiles" for occupations/income types, property / share investor etc with what they consider "normal" income/expenses etc . Entities above/outside these ranges get special interest. ie the audit list

 

[Aceyducey]

Brenda,

I think one of the leading causes is when you dis someone from the ATO at a party.

Cheers,

Aceyducey

PS; My parents' business was audited 10-odd years ago resulted in them getting more money back Tax audits aren't ALWAYS to the detriment of the auditee

 

[BV]

Brenda,

My accountant said last year that a large refund may trigger an audit.

He mentioned that with the large claim they look at your income and the type of claim you are making and decide whether you are worth investigating.

I guess that if you are a high income earner and you do your tax return using an accountant,and you claim a loss of 20K it may be ok.

But if you are on a 30K income and you are claiming 20K loss, something is wrong so they may ask for an explanation.

I had to go through all my receipts in detail and make sure all my claims were legit in case the ATO questioned my claim.

Nothing happened this time though.

Bill

 

[abcdiamond]

I had a client once who had an audit that was triggered by total bankings into his accounts of almost twice his gross declarable income.

He became my client when he needed someone to help him with the Tax Office (UK).

 

[Mondie]

Originally posted by Gill Bates
Only a very general answer.
My understanding is they have "profiles" for occupations/income types, property / share investor etc with what they consider "normal" income/expenses etc . Entities above/outside these ranges get special interest. ie the audit list

Thats what l have been lead to believe too. Also think they run profiles on Accountants as another check on narrowing down those most ripe for an audit. With the computer and IT systems available these days the amount of data matching that can be done is only limited by staff to do the work.

 

[DaleGG]

Hi

There are a number of factors that could trigger an audit including:

your occupation or profession being in the tax office review list
your claims being higher than the norm for that income
the type of claims made being outside the expected amount or percentage of your income

Don't be frightened of an audit, just be prepared.

Dale

ps a long time ago now, I made available the tax office audit questionnaire for rental property audits. I understand that there have been few changes in the questions asked and I'm sure I still have a copy somewhere if you would like one.

 

[D.T.]

Hi Dale,

Would u be able to email that to me, just out of curiousity?

-Ta

Dave

 

[geoffw]

I'm sure that I'm going to be the target of an audit. My claims (thanks to depreciation) are large as compared to income- although every claim is legitimate. I've been disallowed and fined (big time) for following advice from a financial planner (tax effective agricultural). I've had variation of tax forms disallowed.

My advice is always to claim legitimately, and to back up every claim with paperwork. Even things which might have been claimable in one year may not be in a later year (books and seminars on topics you are only just learning about, rather than currently investing, are a prime example).

And if something appears to be on the borderline, leave it alone. TThey can hit you retrospectively (even three + years later).

I'd also be using a professional (an accountant, not a tax agent). With some of the variations in interpretations, you really need to have the posterior covered.

 

[abcdiamond]

Originally posted by geoffw
I'd also be using a professional (an accountant, not a tax agent).

I'll second that comment, my experience with "run of the mill" tax agents, so far hasn't been positively impressionable.

 

[triple_j]

refund > $5000

Hi Brenda,

I heard from an accountant that as soon as your refund exceeds a certain amount for your profession, you're on their "keep an eye on" list.

If you minimise your refund by getting a 221D (or 15-15?) done and get your tax return bit by bit throughout the year, it may look better on your return and thus reduce the chances of getting audited.

Some colleagues in the IT industries are working on a Business Intelligence system for ATO *shhhh* . There are some complex number crunching machines at work and ATO is spending the money on the technology. It all comes down to patterns and rules. If your deductions suddenly shot up, the computer will pick it up. You get the idea. I wish I have the rule base

Hope that helps

Jess.

 

[Kristine..]

Acey

You're right about the benefits of an audit.

About eighteen months into my child care centre, the Commonwealth Govt extended the Fee Relief program to the parents whose children attended private centres (gasp! what will they think of next!).

I found this out very early, as I still had contacts in the C'wealth dept from my political lobbying days.

So, I embarked on an extended education program with the parents so that as many of them as possible would apply for the fee relief when it became available for them.

I even organised for an Officer from Social Security to come to the centre for out-of-hours interviews with the parents.

No only did I have the highest participation rate in the program from the outset, but the Officer found that nearly half of all the families were entitled to some other sort of benefit, too.

I have always enjoyed a positive relationship with govt departments of all varieties - Local, State and Commonwealth, and have been amazed at the amount of assistance the officers are prepared to give, for free!

So, Brenda, maybe you should request an audit! Who knows, you might even get your family allowance restored!!!

Cheers

Kristine

 

[DaleGG]

Hi

I asked my wonderful secretary to re-type the tax office audit questionnaire so that we could post it here. We did not format it or make it pretty, but, the questions and issue are there . . .

I hope that it is helpful

Dale

 

[Aceyducey]

Dale,

And she worked all night on it?

I see it's only just turned 5am & you're already contributing to the forum - great stuff!

Cheers,

Aceyducey

 

[geoffw]

Originally posted by Aceyducey
I see it's only just turned 5am & you're already contributing to the forum - great stuff!

ACDC,

5AM? Mine says he posted at 6:19AM. Did you adjust your forum clock for daylight saving? It should be GMT + 11 hours.

Thanks for all that info Dale- very much appreciated.

 

[bridie]

Dale,
Your generosity- and your secretary's- is astonishing! Thank you so much for providing this valuable document. I see that it is quite a common sense series of questions that any property owner could easily answer, given the huge amount of paperwork we all end up with.
Thank you very much indeed.

 

[Aceyducey]

Thanks Geoff, have fixed it.

But it's still bloody early to be posting to the forum

Cheers,

Aceyducey

 

[Shaggygirl]

Audits

All

Audits can also be triggered by whatever sector the Tax Office is targeting that year. Sometimes it's business expenses, I know one year it was IT Contractors. I think it's only a matter of time before property investors are seriously targetted.

I guess it depends on their resources - my guess is that they'll target serious contenders first - with some small fish for good measure. Maybe Henry will get an audit.

Shaggygirl

 

[annE]

Hi

For how many years generally should IP statements/documentation etc be kept just in case an audit takes place?

Thanks

Ann

 

[geoffw]

Ann,

I believe it's seven years.

When I was in the agriculural "tax effective" schemes (tea trees), I received a refund one year- and, because I had not been disallowed, went on to invest over the next two years. Nearly four years after the initial investment, the lot was disallowed, and I had to repay- plus fines, plus interest.