Two million Australians will receive a call from the Australian Tax Office over suspicious tax claims, with taxpayers told to “fess up” now if they want to avoid serious penalties.

According to Assistant Commissioner Karen Foat, most Australians have little to fear from an Australian Tax Office (ATO) audit, provided they’ve only claimed what they were entitled to.

“Each year the ATO contacts around two million people about their returns. In most cases, audits are not our first action,” Foat said on Friday (27 September).

“Third party data indicating underreported income, and deductions that appear high compared to people with a similar job and income level, tend to raise concerns.”

What happens if I’m audited?

If the ATO has concerns, they will contact the taxpayer directly or their tax agent to ask more questions.

These are often questions seeking an explanation or documentation for a deduction.

“For example, if you’ve claimed deductions for clothing but you work in a job where a compulsory uniform is unlikely – we may just want to know a little more about why you’ve claimed that deduction,” Foat said.

But at other times, the tax office will want more details, usually in the form of evidence of the transactions.

“We will always let you know what issues have attracted our attention and what information we will need from you.

“Our biggest tip is to ensure you work with us from the beginning and provide the information required to help us resolve any concerns and finalise the audit.”

It’s critical to keep good records throughout the year to avoid the frustration of finding old receipts.

“The better your record keeping is throughout the year, the easier the audit process is likely to be when we request to see your records.”

Will the ATO contact my boss if I’m audited?

It’s a possibility. Foat said the ATO staff may ask for information from others, including your boss, to find out if you weren’t reimbursed for expenses your claiming, and to check that the purchase was related to your job.

“Whether we apply penalties will depend on your behaviour. We see behaviours ranging from genuine mistakes through to deliberate over claiming. In the most extreme cases of intentional fraud we may seek to prosecute through the courts,” she added.

“We will keep you updated throughout the audit process. This includes letting you know in writing that the audit is finished, whether or not we have made any changes to your return, and how we came to our decision.”

What to do if you make a mistake on your tax return

Foat’s advice is to tell the ATO as soon as possible.

“If we haven’t been in touch with you yet, you can amend your return yourself on myTax or if you use an agent to ask them to lodge an amendment for you,” she said.

“If the ATO has been in contact to review your claims and you know you’ve over-claimed, it is important to be honest and get the matter resolved quickly. Taxpayers are more likely to face penalties if they aren’t honest with us once we come knocking.”

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