According to the tax office, taxpayers not declaring their full income is leading to a tax shortfall of close to $1.4 billion each year.
“Tax lost from under-reported income is a significant cost to the community. While the amounts might be small individually, together they are adding up to a lot,” said assistant commissioner Kath Anderson.
“We understand that people make mistakes and can forget to include some of their income. But those who leave out income to avoid paying their fair share of tax should be aware that there can be penalties and interest.”
That is why the ATO is boosting its efforts to ensure all income is properly reported. A major source of this increased attention involves advanced data analytics to track incoming payments that have not been reported.
“We expect to process a record amount of information this year. It will not only make tax returns faster and easier for taxpayers, but will also help us identify people who are failing to declare income. Our compliance models have already auto-adjusted more than 112,000 tax returns in July and August, recouping $53 million,” Ms Anderson said.
Explaining some of the most common errors – whether deliberate or accidental – Ms Anderson listed the following as things to avoid doing:
• Not including any cash wages or income
• Failing to report income from secondary sources, such as a second job or through the share or gig economy
• Not reporting capital gains on cryptocurrency
• Foreign-sourced income not being declared
The latter is of particular concern to the ATO, which has been empowered with access to new information sources in a bid to track foreign earnings.
“We are concerned that taxpayers may be failing to include foreign income from pensions, employment, investments, business income or capital gains on overseas assets,” said Ms Anderson.
“The collection of this additional data [from the likes of AUSTRAC, FATCA and international information exchange agreements] will help us identify people who are deliberately omitting income from their tax return, but will also help those who have several streams of income who find it hard to keep accurate records.”
She noted that the penalties for failing to declare income are steep, over and above the repayment of any tax that falls due on those earnings.
“Penalties can range from 25 per cent up to 75 per cent of the shortfall, in addition to paying the money owed,” Ms Anderson said.
The ATO also revealed a major crackdown on work-from-home claims, particularly pertinent for business leaders who conduct at least some of their business-related activities from home.
Meanwhile, a parliamentary inquiry has been urged to explore implementing automated tax returns, which could reduce the number of errors and non-declarations made on tax returns each year.