Who the ATO is targeting this year?
By Gillian Bullock, ninemsn Money, July 2008
If you are in the medical profession and have share and property investments, then the taxman is targeting you.
It’s not that the Australian Taxation Office wants to catch you out so much as a case of trying to prevent you from making mistakes in your tax return for the 2007-08 year.
In a speech at the National Institute of Accountants’ NSW state congress, the ATO’s second commissioner Jennie Granger talked about the tax office’s ‘prevention is better than cure’ approach where it endeavours to pre-empt any incorrect actions.
According to Granger, 10 years ago only 34 percent of people owned shares, compared with 46 percent today. In addition, she says that in just two years the number of taxpayers with rental properties grew by 100,000 to 1.6 million in 2006.
As a result of all these increases, this tax time the ATO will be paying particular attention to investors, salary packaging of executives and directors and employees and their work expense claims.
On the investment front, the tax office will look particularly at rental properties, dividends and interest, sale of investments, dodgy tax schemes and saving for retirement.
Granger says the three key areas of risk are rental properties, the stock market and capital gains tax events that occur on the sale or transfer of these assets.
Rental properties
More than 1.5 million people claimed more than $24 billion in rent deductions, with almost 170,000 claiming for the first time. As a result, the tax office will write to these new entrants advising them of the do’s and don’ts of claiming. It will also write to people it has selected because their previous claims displayed some of the following characteristics:
Unusually high claims for rental deduction
Low rental income in relation to rental deductions
High claims for interest expenses
High claims for borrowing expenses.
The ATO itemises some common mistakes taxpayers make in relation to rental properties such as not apportioning expense claims when the property is only available for rent part of the year or claiming the full cost of a visit to inspect a property when it is combined with a private purpose like a holiday.
Data matching
The tax office has data-matching capabilities to keep track of your interest and dividend income as well as your capital gains tax liabilities. So it is not advisable to try and understate any of this income.
The ATO uses data from state and territory revenue offices, managed funds, the Australian Securities Exchange and share registries. And the banks also advise of any interest earned. As a result, pre-filling tax returns is one way of making sure you don’t miss anything. These are available on the ATO website: www.ato.gov.au/individuals
Target groups
There are three key groups that the tax office will target this year for special focus for work-related expenses. These are:
Nurses — particularly claims for self-education
Medical practitioners — particularly travel and entertainment expenses
Chefs — particularly for expenses for travel between home and work and for pre-vocational courses
Common mistakes include calculating deductions for car expenses, travel expenses, self-education expenses and ambit claims for clothing and laundry expenses. Tips:
If you get a letter from the tax office ahead of lodging your return providing you with advice on what you can and cannot claim, then it would make sense to be particularly careful. Going with its approach that prevention is better than cure, you would be foolish to ignore this advice.
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