Timothy Munro, managing director of Change Accounts and Advisers, said that he is actively anticipating a spike in the number of tax audits taking place over the next 12 months.
“What we’re finding is that the ATO has said over the last number of months that they are doing a lot of comparison of databases, bank accounts from overseas,” Mr Munro told My Business’ sister title Accountants Daily.
“Every year they are linking more and more – over the last few years they’ve linked interest and dividends, but now they are starting to get a lot further, linking the databases to match property sales, to match high-value car purchases and a whole range of things.
“There have been a few cases when they’ve looked at people buying international plane tickets and buying cars and comparing that to the actual income that they’ve earned and what they are declaring is no way enough to costs of their expenditure.”
Undeclared income has been a particular focus area of the tax office, having publicly stated that it will strive to recover an annual shortfall of nearly $1.4 billion caused by individuals who leave income out of their tax returns, as part of its broader plan to recoup the $8.7 billion individual tax gap it revealed earlier this year.
Foreign income streams have also been earmarked, with the Common Reporting Standard (CRS) seeing the first lot of data to be exchanged with over 100 foreign tax authorities on 30 September.
Mr Munro suggested accountants will and should be advising their business clients of the potential for greater audit activity.
“It is our role to make clients aware of this and I think a lot of clients in general have been sticking their heads in the sand and think it won’t happen to them but we know it is going to happen and the ATO is going to be very much clamping down on things that clients might think they could get away with in the past,” said Mr Munro.
“Don’t try to put one over the ATO; do the right thing so you can sleep better at night.”