Asking for a deduction audit…

When looking at deductions taxpayers in particular occupations and locations claim, the Commissioner uses, in real time, a comparison with what they call the taxpayer’s ‘nearest neighbour’.

From this real time comparison with other taxpayers in the same industry and location the Commissioner actively prompt the taxpayer in real-time that their claims are out of the normal range, and gives them the opportunity to consider more deeply, prior to final confirmation, whether their claim is valid.

And what is the outcome of doing this…

While taxpayers where preparing their tax returns using MyTax in 2020 the Commissioner issued 350,000 prompts, as they were preparing the returns, asking taxpayers check the figures they have entered in MyTax. This was as a result of a deduction being significantly different to those of others in similar circumstances.

And how did people respond to this warning by the Commissioner?

  1. About a third immediately changed their deduction
  2. About a third made no change
  3. But the final third progressively reducing their claim for a deduction to see when they would get below the level where the warning would come up – Talk about asking for an audit!!!

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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