Taxpayer reviews and audits by the Australian Taxation Office (ATO) are on the rise so there has never been a more important time for taxpayers to understand the ATO Self-Assessment system.

With sophisticated data matching processes at the ATO’s fingertips, Pilot Partners expect this review and audit activity to increase in the future.

What is ATO self-assessment?

The information that you provide to the ATO via lodging a tax return or an activity statement is initially accepted as being correct. However, the ultimate responsibility is on you, as the taxpayer, to ensure that the information you lodge complies with taxation law.

As a medico you may use a tax agent to help you prepare and lodge your tax returns and activity statements. Remember, the responsibility of the information lodged still ends with you as the taxpayer.  If the ATO chooses you for an audit or review, you must ensure you hold all relevant source documents to verify the information lodged.

 

How far back can the ATO review your tax affairs?

Despite a tax return or activity statement being initially accepted by the ATO as being lodged, it may be reviewed up to 4 years after the date of your original tax assessment notice. The review period can vary depending on the particular circumstances. For example, if the situation involved fraud or tax evasion, the ATO may amend your assessment at any time.

 

What particular Work Related Deductions are the ATO targeting?

Recently, the ATO have issued warnings on excessive claims being made by small businesses and individuals.  This has triggered increased ATO review and audit activity around certain work related deductions.

Historically the ATO has targeted specific occupations in their review of taxpayers’ work related deductions. Through improved technology and access to more information, the ATO are using sophisticated data matching to review work related expenditure for many occupations, including the medical profession.

The data matching processes include:

  • Automatically comparing the work related deductions claimed by all taxpayers in similar occupations and on similar income levels to target higher than average claims of work related expenditure;
  • Requesting from taxpayers a summary of how they calculated their cents per kilometre deduction;
  • Contacting a taxpayers employer to gather more information on reimbursement arrangements;
  • Automatically reviewing data provided by banks and credit card providers to check for reimbursed expenditure i.e. professional medical subscriptions or courses reimbursed by your employer; and
  • Sourcing of information from state and territory motor vehicle registering bodies, state and territory title offices and revenue agencies, government bodies, online selling platforms, sharing economy facilitators, stock exchanges, share registries and health insurers to name just a few.

While there are reduced record keeping requirements for work related deductions totalling less than $300, laundry costs totalling less than $150 and motor vehicle claims of 5,000km or less under the cents per kilometre method, taxpayers must still be able to demonstrate how the claim was calculated.

 

What happens with errors that are made in a tax return or activity statement?

Where the ATO becomes aware of an error, they will most likely issue an amended assessment.

If this results in additional tax owing, interest and penalties may be applied on top of your amended assessment. On the contrary, if tax has been overpaid to the ATO, interest may be paid to you.

If you become aware of an error, the ATO advises that you must notify them as soon as possible. Where a mistake has been voluntarily disclosed, the ATO have been known to grant concessional treatment on penalties and interest charges.

It is important you seek quality accounting advice to ensure information lodged in your tax return and activity statements is accurate, consistent and maximises tax efficiencies.