As taxpayers, we all want to avoid being audited by the Australian Taxation Office (ATO). While audits can occur randomly, certain red flags can increase your chances of being selected for an audit. Here are some common red flags that can trigger an ATO tax audit:
Unusually High or Low Income
If your income is significantly higher or lower than other taxpayers in your industry or occupation, this may attract the attention of the ATO. If you have a high income, ensure that all deductions claimed are legitimate, and if you have a low income, make sure your deductions are reasonable and can be substantiated.
Large or Unusual Expenses
If you claim large or unusual expenses on your tax return, this may raise a red flag with the ATO. Make sure you have all the necessary documentation to support your claims, and that the expenses are related to your work or business.
International Transactions
If you have international transactions, such as offshore bank accounts or investments, this may attract the attention of the ATO. Ensure that you’re complying with all tax reporting requirements for these transactions and seek professional advice if you’re unsure about your obligations.
Incorrect Reporting of Income or Expenses
If the information on your tax return doesn’t match the information that the ATO has received from other sources, such as employers or financial institutions, this may lead to an audit. Make sure you double-check all information on your tax return and keep accurate records to avoid errors.
Multiple Years of Losses
If you have multiple years of losses in your business, this may raise questions about the viability of your business and whether you’re operating for profit. Make sure you have a clear business plan and that your expenses are reasonable and necessary.
Previously Audited
If you’ve been audited in the past, the ATO may be more likely to audit you again. Ensure that you’ve addressed any issues from previous audits and that you’re compliant with all tax obligations.
Consult Tax filing experts to avoid ATO audits.
In conclusion, while being selected for an ATO tax audit can be stressful, there are ways to reduce your chances of being audited. Avoid red flags by accurately reporting your income and expenses, keeping accurate records, and complying with all tax reporting requirements. Seek professional advice if you’re unsure about your tax obligations, and address any issues from previous audits to reduce your chances of being audited again. By following these steps, you can reduce your chances of being audited and ensure that you’re compliant with all tax obligations.
