Every year the Australian Tax Office (ATO) warns us who they’re targeting in a bid to scare us into submission by June 30. It certainly won’t be flight attendants this year but it really doesn’t matter which group you’re in, there are a set of common mistakes that can cost you dearly.
Tim Loh, Assistant Commissioner at the ATO suggests if you’re doing the right thing and you make a legitimate mistake, you’ll be fine – provided you have the evidence to back each claim. The flip side is that they’ll be cracking down heavily if you’re lazy or downright fraudulent.
Top 3 ATO targets in 2021
The ATO uses complex data analytics and benchmarking tools to identify exceptions and outliers for audit purposes.
This year they’ll be targeting travel costs, work clothing and work from home expenses because there should be a material variance from previous years claims given the Covid lockdowns.
Tim Loh suggests the best and easiest way to avoid the attention of the ATO is to simply make sure you have receipts and evidence to justify your expenses.
Top Apps to help with receipt management
Apps like ReceiptBank, Expensify or Freshbooks allow you to take a photo from your phone of your receipts and store it for tax time. It’s quick, easy and compliant, and your accountant or bookkeeper will love you!
Your calendar is evidence
Diary entries are also evidence. Oftentimes, your diary will be used as evidence to make sure your expenses, location and timing all match up for the audit. So keeping a thorough diary is also important to identify and justify your work-related expenses.
2021 ATO targets
If you have high working-from-home expenses, or high or even similar, motor vehicle expenses compared to previous years, then these will stand out as exceptions in a year where we’ve all been locked down.
So too, if you’ve been furloughed and you’re claiming work expenses that have been dragged over from last year’s tax return – this will also stand out as an exception to the ATO. So double-check your tax agent’s entries to make sure your expenses can be proven, and that they make sense in the context of the 2021 tax year.
As a final thought, consider maximising your deductible super contributions, don’t forget your education expenses and make sure you’ve covered your bases if you’re a property investor.
We’re not tax agents, of course, but do let us know if you’d like recommendations for exemplary accountants and bookkeepers who are a pleasure to deal with, and most importantly, will protect your interests at tax time.