Lodging​ ​Your​ ​Own​ ​Tax​ ​Return

What​ ​Happens​ ​When​ ​The​ ​ATO​ ​Audits​ ​You?

Lodging​ ​your​ ​own​ ​tax​ ​return​ ​can​ ​be​ ​risky​ ​business.​ ​​ ​Because,​ ​let’s​ ​face​ ​it,​ ​without​ ​the​ ​appropriate tools,​ ​information​ ​and​ ​records,​ ​you​ ​may​ ​just​ ​be​ ​randomly​ ​filling​ ​boxes​ ​without​ ​knowing​ ​the repercussions.​ ​​ That’s​ ​why​ ​we’re​ ​here​ ​to​ ​help.

You​ ​probably​ ​love​ ​the​ ​convenience​ ​of​ ​lodging​ ​your​ ​tax​ ​return​ ​from​ ​the​ ​comfort​ ​of​ ​your​ ​lounge​ ​while wearing​ ​pj's​ ​and​ ​sipping​ ​coffee​ ​(we​ ​don’t​ ​blame​ ​you),​ ​but​ ​we​ ​advise​ ​proceeding​ ​with​ ​caution.

When​ ​you​ ​choose​ ​to​ ​lodge​ ​your​ ​tax​ ​return​ ​without​ ​the​ ​assistance​ ​of​ ​an​ ​accountant,​ ​you’re​ ​literally one​ ​hundred​ ​per​ ​cent​ ​responsible​ ​for​ ​your​ ​calculations.​ ​​ ​And​ ​with​ ​the​ ​ATO​ ​cracking​ ​down​ ​on individuals​ ​who​ ​are​ ​choosing​ ​to​ ​use​ ​MyTax,​ ​there’s​ ​a​ ​few​ ​things​ ​you​ ​should​ ​be​ ​aware​ ​of.

When ​you ​lodge ​your own tax return you must: •​ ​Declare​ ​your​ ​entire​ ​assessable​ ​income

•​ ​Only​ ​claim​ ​entitlements​ ​and​ ​tax​ ​offsets​ ​that​ ​you​ ​are​ ​eligible​ ​for

It​ ​may​ ​take​ ​some​ ​time​ ​to​ ​research​ ​which​ ​items​ ​you​ ​are​ ​actually​ ​eligible​ ​to​ ​claim​ ​and​ ​chase​ ​up​ ​group certificates,​ ​but​ ​trust​ ​us​ ​-​ ​it​ ​will​ ​pay​ ​off​ ​in​ ​the​ ​long​ ​run.

Each​ ​year​ ​the​ ​ATO​ ​targets​ ​specific​ ​industries​ ​and​ ​individuals.​ ​​ ​And​ ​not​ ​only​ ​for​ ​the​ ​previous​ ​financial year,​ ​but​ ​for​ ​up​ ​to​ ​FIVE​ ​previous​ ​financial​ ​years.​ ​​ ​This​ ​is​ ​why​ ​lodging​ ​accurate​ ​tax​ ​returns​ ​every single​ ​time​ ​is​ ​SO​ ​important.

2015​ ​saw​ ​a​ ​70%​ ​increase​ ​in​ ​online​ ​lodgers,​ ​making​ ​up​ ​a​ ​whopping​ ​3​ ​million​ ​Australians.​ ​​ ​Lodging your​ ​own​ ​tax​ ​return​ ​can​ ​be​ ​a​ ​safe​ ​and​ ​time​ ​efficient​ ​way​ ​to​ ​complete​ ​this​ ​task​ ​-​ ​if​ ​it’s​ ​done​ ​correctly. However,​ ​with​ ​so​ ​many​ ​people​ ​taking​ ​their​ ​tax​ ​returns​ ​into​ ​their​ ​own​ ​hands,​ ​it’s​ ​expected​ ​that​ ​the ATO​ ​will​ ​be​ ​monitoring​ ​self-lodgers​ ​closer​ ​than​ ​ever​ ​before.

PREPARING​ ​FOR​ ​AN​ ​AUDIT So​ ​in​ ​case​ ​the​ ​ATO​ ​audits​ ​you,​ ​what​ ​should​ ​you​ ​have​ ​prepared?

Have Your ​Records ​Ready If​ ​you​ ​are​ ​audited​ ​by​ ​the​ ​ATO,​ ​you​ ​may​ ​be​ ​asked​ ​to​ ​provide​ ​your​ ​entire​ ​collection​ ​of​ ​records.​ ​​ And the​ ​ATO​ ​expects​ ​that​ ​you’ll​ ​have​ ​these​ ​readily​ ​available​ ​for​ ​the​ ​past​ ​five​ ​years.​ ​​ ​Business bookkeeping,​ ​logbooks​ ​and​ ​receipts​ ​are​ ​some​ ​of​ ​the​ ​most​ ​important.​ ​​ ​The​ ​ATO​ ​is​ ​able​ ​to​ ​ask​ ​for​ ​any of​ ​your​ ​records​ ​and​ ​is​ ​likely​ ​to​ ​request​ ​evidence​ ​for​ ​large​ ​purchases​ ​to​ ​investigate​ ​these​ ​further.​ ​​ ​We cannot​ ​stress​ ​enough​ ​how​ ​important​ ​it​ ​is​ ​to​ ​keep​ ​a​ ​paper​ ​trail​ ​of​ ​your​ ​claimed​ ​expenses​ ​and​ ​income.

Check ​Out ​Benchmarks If​ ​your​ ​income​ ​and​ ​expenses​ ​as​ ​an​ ​individual​ ​or​ ​business​ ​owner​ ​significantly​ ​differ​ ​from​ ​others​ ​in your​ ​industry,​ ​this​ ​is​ ​likely​ ​to​ ​ring​ ​alarm​ ​bells​ ​for​ ​the​ ​ATO,​ ​specifically​ ​those​ ​in​ ​cash​ ​based​ ​industries. You​ ​can​ ​check​ ​your​ ​industry’s​ ​benchmarks​ ​through​ ​the​ ​​ATO​ ​app​​ ​to​ ​get​ ​a​ ​rough​ ​idea​ ​of​ ​where​ ​you​ ​sit in​ ​comparison​ ​to​ ​others​ ​in​ ​your​ ​area​ ​of​ ​work.​ ​​ ​If​ ​your​ ​income​ ​and​ ​expenses​ ​are​ ​excessively​ ​low​ ​or high,​ ​you’ll​ ​want​ ​to​ ​be​ ​able​ ​to​ ​prove​ ​why.

Evidence If,​ ​for​ ​example,​ ​you’re​ ​claiming​ ​80%​ ​of​ ​your​ ​phone​ ​and​ ​internet​ ​costs​ ​for​ ​work​ ​purposes,​ ​the​ ​ATO will​ ​want​ ​to​ ​know​ ​how​ ​you​ ​concluded​ ​this​ ​figure.​ ​​ ​We​ ​suggest​ ​keeping​ ​a​ ​logbook​ ​of​ ​your​ ​time​ ​spent using​ ​your​ ​phone,​ ​internet​ ​and​ ​any​ ​other​ ​time​ ​or​ ​space​ ​related​ ​work​ ​expenses​ ​for​ ​at​ ​least​ ​three months.​ ​​ ​This​ ​way​ ​you’ll​ ​have​ ​proof​ ​of​ ​the​ ​figures​ ​being​ ​projected​ ​over​ ​the​ ​year.​ ​​ ​Yes,​ ​this​ ​can​ ​be​ ​an annoying​ ​and​ ​tedious​ ​process,​ ​but​ ​ensuring​ ​that​ ​your​ ​calculations​ ​can​ ​be​ ​justified​ ​means​ ​that​ ​being audited​ ​by​ ​the​ ​ATO​ ​won’t​ ​be​ ​as​ ​daunting​ ​should​ ​the​ ​time​ ​come.


So​ ​just​ ​to​ ​recap: ● Know what you’re ​entitled to claim within your industry

● Never ​claim an expense that​ you​ don’t have​ proof of, ​i.e.​ a​ receipt

● Always store your receipts in a safe place and take photos of them to reduce the likelihood of them ​fading ● Take the ​time to ​follow accurate​ bookkeeping ​or ​log booking​ methods

● Be ​diligent with ​calculations

● Always lodge your entire income. This includes money earned from interest, Uber and Airbnb ​to ​name ​a ​few

● Don’t ​simply ​keep​ increasing ​amounts ​in ​ your ​ ​MyTax​ lodgement ​to ​grow ​your refund!

AUDIT​ ​OUTCOMES The​ ​ATO​ ​generally​ ​audits​ ​individuals​ ​and​ ​businesses​ ​who​ ​don’t​ ​fit​ ​the​ ​norm​ ​within​ ​their​ ​industry. This​ ​could​ ​be​ ​in​ ​the​ ​form​ ​of​ ​low​ ​or​ ​high​ ​income​ ​or​ ​claims.​ ​​ ​There​ ​are​ ​three​ ​outcomes​ ​to​ ​an​ ​audit​ ​by the​ ​ATO. 1. ​ ​If​ ​you​ ​realise​ ​that​ ​there​ ​has​ ​been​ ​a​ ​mistake​ ​with​ ​your​ ​tax​ ​return​ ​and​ ​disclose​ ​this​ ​information to​ ​the​ ​ATO,​ ​the​ ​penalties​ ​applied​ ​may​ ​be​ ​reduced​ ​as​ ​well​ ​as​ ​interest.​ ​​ ​This​ ​is​ ​a​ ​win​ ​for​ ​you, but​ ​still​ ​doesn’t​ ​come​ ​without​ ​consequences.

2. In​ ​the​ ​case​ ​where​ ​you​ ​believe​ ​that​ ​you​ ​don’t​ ​owe​ ​the​ ​ATO​ ​as​ ​much​ ​as​ ​they​ ​believe​ ​you​ ​do, you​ ​are​ ​able​ ​to​ ​dispute​ ​this.​ ​​ ​In​ ​some​ ​cases,​ ​the​ ​ATO​ ​can​ ​make​ ​mistakes​ ​too​ ​so​ ​be​ ​ready​ ​to investigate​ ​your​ ​situation​ ​from​ ​your​ ​end.​ ​​ ​This​ ​is​ ​why​ ​it’s​ ​so​ ​important​ ​to​ ​be​ ​able​ ​to​ ​justify your​ ​earnings,​ ​spendings​ ​and​ ​entitlements​ ​if​ ​you​ ​get​ ​audited​ ​by​ ​the​ ​ATO.

3. You​ ​intentionally​ ​made​ ​false​ ​claims​ ​on​ ​your​ ​tax​ ​return​ ​and​ ​are​ ​hit​ ​with​ ​a​ ​nasty​ ​fine,​ ​along with​ ​interest.​ ​​ ​Come​ ​on​ ​guys,​ ​this​ ​one​ ​won’t​ ​be​ ​you​ ​with​ ​all​ ​of​ ​our​ ​handy​ ​hints,​ ​right?

PENALTIES There ​are three phases​ of ​penalties that​ you could​ face​ if ​you’re​ audited​ by​ the​ ATO. In the instance where you have simply failed to take reasonable care, you’ll be hit with 25% of the shortfall amount (i.e. the tax you now owe). This is simply when you have not taken the reasonable care​ ​that​ ​someone​ ​else​ ​in​ ​your​ ​position​ ​would​ ​have​ ​done. Next up, recklessness will slap you with a 50% penalty of the shortfall amount. For tax purposes, recklessness refers to a situation where a reasonable person would have realised that there was a real​ ​risk​ ​however​ ​it​ ​has​ ​been​ ​overlooked. And the one you really don’t want to get caught up in is intentional disregard. You’ll get slapped with a huge 75% of the shortfall amount penalty when you or your business has intentionally disregarded the law. This situation arises when you are completely aware of a clear tax obligation and you continue as normal in hope of achieving certain results such as underpaying tax or over claiming an entitlement.

Pretty scary, huh. Our advice to you is to make sure that you are following accurate practices when lodging your own tax return, with your safest bet being going through a tax agent. Taking risks is overrated.

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