Most tax returns are lodged and processed without any issue, but certain patterns are far more likely to prompt a closer look from the ATO than others. However, understanding what these are makes it much easier to avoid unnecessary attention and the stress that comes with it.
The ATO compares deduction claims against typical patterns for people in similar occupations, using data collected across millions of returns. Consequently, a claim that’s significantly higher than what’s typical for your industry without solid justification is one of the most common triggers for a review.
Claiming exactly $300 in work-related expenses, or suspiciously round numbers across multiple categories, can suggest estimates rather than actual records. Therefore, it’s worth using your real figures, even if they’re less tidy, since genuine numbers are rarely perfectly round.
The ATO receives income data directly from employers, banks, and other institutions, and cross-checks it against what you report. Consequently, forgetting to declare bank interest, a side job, or investment income is one of the fastest ways to trigger a discrepancy flag.
Clothing that isn’t a genuine uniform, general commuting costs, or a home office claim that doesn’t reflect actual work use are common examples of claims that don’t hold up under scrutiny. Therefore, it’s worth being honest about the work-related proportion of any claim rather than rounding up.
Overclaiming interest on a loan that’s partly used for personal purposes, or claiming a capital improvement as an immediate repair, are two of the most frequent rental property mistakes that attract attention. Moreover, rental property deductions are an area the ATO reviews particularly closely, given how often errors occur.
A sudden, unexplained jump in deductions or a significant change in reported income from one year to the next can prompt a closer look, even if everything is genuinely correct. Consequently, it’s worth being prepared to explain any significant change if asked.
Even a completely legitimate deduction can be disallowed if you can’t produce a receipt or record when asked. Therefore, record-keeping isn’t just about accuracy it’s your protection if the ATO ever follows up.
A review or query isn’t automatically a sign of wrongdoing many are resolved quickly once documentation is provided. However, responding promptly and accurately is important, and having a registered tax agent handle the correspondence on your behalf often makes the process considerably smoother.
EBATS prepares accurate, well-documented returns and provides support if the ATO ever follows up after lodgement.
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