Every two years or so, most accounting firms will be selected for a review by the tax office to ensure that we’re all doing the right things and to let us know what they’re looking for and how they assess returns for audit.

So this week, we spent a couple of hours entertaining a lovely lady from the ATO in our office. Fascinating experience and an excellent insight into how the tax office is operating these days.

Statistical analysis and data-matching is becoming more and more powerful. In particular, the tax office have told us that they’re looking closely at the following items;

  • Taxpayers who claim high percentages of their internet and mobile phone bills without keeping records to justify the claim
  • High logbook percentages for work-related travel
  • Claiming the 5,000km maximum car use without being able to demonstrate cause for high kms
  • Arbitrary claims for sun protection expenses without any evidence
  • Claims for gifts to co-workers and clients without reasonable connection to generating higher income

We were also told that the tax office position is that you must have actually received a Part A payment for family tax benefit before being able to claim the education rebate. As silly as this sounds, it means that you cannot claim the rebate in your return if you wait until the end of the year to claim your family tax benefits using your tax return. Instead, the tax office want you to wait until receipt of those payments and then request to amend your tax return afterwards. Ridiculous? We thought so, too.

Then, during the second half of the meeting, the auditor checked out some of our workpapers and schedules used in completing tax returns, along with our client checklists and internal procedures. The up-shot of that process was that we passed the review with flying colours (as expected!), despite claiming more for our clients than 96.3% of tax agents with a similar client base. Well done team!!