ATO assistant commissioner Kath Anderson recently reminded SMEs and their accountants that the ATO will be using real-time data to compare taxpayers with others in similar occupations and income brackets to identify higher-than-expected claims this tax time.
Speaking to My Business’ sister publication Accountants Daily, HLB Mann Judd partner Peter Bembrick said that the ATO is taking work-related expense claims very seriously.
“The ATO has recently indicated that they will be closely looking at out of proportion work-related deductions due to the growth in the amount of work-related deductions,” he said.
“The ATO will also do some benchmarking: match with similar businesses and professionals.”
According to Mr Bembrick, incorrect claims can lead to interest and penalties.
“If you fail to indicate that all or part of the claim can be substantiated, penalty will be imposed on failing to take reasonable care,” he said.
“Usually this is 25 per cent of the tax shortfall and another 20 per cent penalty if you had been caught claiming unsubstantiated amounts [from] earlier income years. Further, these can lead to costly disputes with [the] ATO.”
Matt Free, a business advisory partner at Moore Stephens, said that penalties can in fact go above and beyond 25 per cent if the offence is more serious.
According to Mr Free, the penalty can be 50 per cent of the shortfall where the taxpayer is found to show recklessness and an indifference to the inherent risk associated with such a claim, and 75 per cent of the shortfall for intentional disregard of the law that causes either an underpayment of tax or an overclaim of an entitlement.
Incorrect claims can also lead to wider and ongoing scrutiny from the ATO, according to Mr Free.
“Such claims have the potential to have greater attention placed on the taxpayer in future years if found out by the ATO, potential for an audit of the entire tax return and related tax affairs,” he said.