More ATO Audit Activity is Coming… What you need to know
We have seen an increase in ATO audit activity.
The ATO is using various data matching programs to determine whether taxpayers are recording their affairs correctly and reporting the correct taxable income information.
For some background, the Australian Tax System is one of Self Assessment.
That means that when you lodge your returns, the ATO accepts the contents of the return at face value but obligates you to keep your tax records.
The ATO reserves the right to review your tax returns and request supporting data to justify the claim.
We have seen instances where ATO has denied claims and then waited for the supporting data to come.
The ATO registered three data-matching notices in August 2024 for compliance-related purposes:
- Notice of lifestyle assets: The ATO will acquire lifestyle assets data from insurance providers for 2023-24 through 2025-26 for specified classes of assets where the relevant asset value is equal to or exceeds the nominated thresholds. The data items include client identification and policy details.
- Notice of Property Management: The ATO will acquire property management data from property management software companies for 2018-19 through 2025-26. The data items include property owner identification and property transaction details.
- Notice of an Officeholder: The ATO will acquire officeholder data from ASIC, the ORIC, the ACNC, and ABRS for 2023-24 through 2026-27. The data items include name, contact details, date of birth, ABN, organisation details, state of incorporation, and officeholder type, including officeholder role start and end dates.
With the ATO’s increasing data matching efforts, it’s inevitable that audit activity will rise. The ATO will be vigilant in ensuring correct tax reporting, and you’ll need to be prepared to prove your case. This expansion of data matching, along with the introduction of Single Touch Payroll and other measures, means that audit activity is on the rise. Further articles are contained here:
The ATO have rights to:
- Withhold refunds until they have completed their review;
- Ask for information that goes back up to 4 years from the lodgement of your previous returns;
- Delay responses to queries until they have had the opportunity to review.
Many clients have experienced an ATO review or an ATO audit, and unfortunately, the ATO have not changed anything. The client has incurred additional cost, just to say that they did the right thing. These costs can be significant, and it’s important to be aware of the potential financial risk.
This is why we partnered with an insurance company for our AuditShield program, so that you have coverage to cover fees for us to respond to an ATO review or audit and to be able to prove your case and that you are correct in the first place. For more information on our AuditShield Program, please see this article:
Please contact us if you have any concerns about your tax affairs.
