The ATO uses data matching to determine whether or not an audit is required.  Data matching compares data from different sources against lodged tax returns.  If there is a discrepancy, the ATO may escalate the tax return for further investigation.

For individual taxpayers, the ATO matches data with financial institutions, share registries, data reported by employers, and distributions from managed funds and trusts.

With regards to rental properties, the ATO matches data with banks, rental bonds boards, and revenue offices.

When determining whether to audit a business, the ATO can compare data to a larger variety of sources.  For example, is the disposal of a motor vehicle reported by the RTA reflected in the tax return?

If the tax return data does not match the data reported from other organisations, you could be selected for an audit.

In many cases there is a valid reason for the apparent discrepancy, but I recommend that you treat a ‘please explain’ letter with care, and seek advice from your accountant before responding.


Running Expenses

BUSINESS RUNNING EXPENSES If you have a sole purpose office at home, you can claim electricity, gas, and water consumption, on the same % as the office to the total floor size. Claiming running expenses does not lead to Capital Gains Tax (CGT) when the house is sold....

Offset vs Deduction

OFFSET VS DEDUCTION A deduction reduces your taxable income, whereas a tax offset (sometimes referred to as a rebate) directly reduces the amount of tax payable on your income. For example, tax payable on an income of $110k is $30,297. If you have a deduction of $1k,...

Adjusted Taxable Income

ADJUSTED TAXABLE INCOME A question that we are quite often asked, is "What is the adjusted taxable income line in my tax return?"  Your adjusted taxable income (ATI) is the sum of taxable income, adjusted fringe benefits, tax-free pensions or benefits, target foreign...

PAYG Instalments

PAYG INSTALMENTS When you have a substantial tax payable amount during a tax year, in order to pre-empt your tax payable the following year, the ATO places you in the PAYG Instalment system.  This means that you pay an amount to the ATO each quarter, to ensure that...