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.


Inheriting Property

INHERITING PROPERTY There are no death taxes in Australia. This means that if you receive a property from a deceased estate, no tax is payable on that transfer. However, tax may be payable if you sell it down the track. If the property was a main residence before...

Property Loans

PROPERTY LOANS Interest on a loan to buy or build a rental property is tax deductible. While the property is rented, or available for rent, you can also claim interest charged on loans taken out to purchase assets, for repairs and for renovations. So far, so good. If...

Rental Property Ownership

RENTAL PROPERTY OWNERSHIP If a property is owned by 2 or more people, it can be owned as joint tenants or tenants in common. If joint tenants, then the obligations are joint and several, so that even if only one of the owners is sued, the creditor can take assets from...

Capital Gains Tax Rate

CAPITAL GAINS TAX RATE Contrary to popular belief, there is no specific capital gains tax rate. If you sell a property then the profit, plus or minus a myriad of adjustments, is added to your taxable income and taxed accordingly. So, if you income is $100k, and you...