I’ve heard a lot from the ATO this tax season about their increased abilities to identify businesses and individuals who may be underreporting their income or overclaiming their deductions. How real is this and how does the ATO do it?
Every year when 30 June rolls around the ATO makes statements about how they’re clamping down on something and often these warnings can leave some taxpayers wondering how effective the ATO can be in backing up these statements. Unfortunately for the more unscrupulous taxpayers, the ATO’s systems really have become a lot more sophisticated in recent years and they are now at the point where they are far more effective in identifying those who may be doing the wrong thing.
The ATO’s abilities have increased significantly in recent times by benchmarking certain occupations and industries against a set of data collated for each group of taxpayers. While they have arguably been able to do this for many years, in more recent times their technology has moved forward so far that not only do they have the benchmarking data, but taxpayers lodging online via the ATO will be warned in real time if their numbers appear unusual. They will also apply the same benchmarking to returns lodged via a tax agent, with an ever-increasing number of follow up letters being issued once tax returns have been lodged. Tax agents are even being benchmarked to identify agents who are repeatedly lodging returns with irregularities.
If you’re concerned about ATO benchmarking and what it might mean for you then there’s a simple solution – make sure your claims are legitimate and seek the advice of a reputable tax agent if you’re unsure. One thing is for sure though – Big Brother is watching more than ever and there will be ever-increasing scrutiny of those with unusual claims, especially with the ATO’s desire to increase tax collections.
If you’d like to discuss the ATO’s benchmarking and what it might mean for you and your business, please contact your local adviser.