How to avoid triggering an ATO tax audit when you complete your tax return.

Guys, it’s tax time.

That means, potentially, you could get a nice little bonus in your bank account just in time for the end of season sales.

Of course, everyone wants to maximise the amount of moolah they get back from the tax man, but getting a bit loose with your tax return can actually trigger a tax audit (cue the soundtrack from Jaws).

Luckily Mark Chapman, the Director of Tax Communications at H&R Block, has walked us through exactly what you should and shouldn’t do on your tax return to avoid the wrath of the ATO.

  • Don’t claim things you’re not entitled to. 

Although it’s very tempting to claim everything on tax – if you don’t have the receipts, don’t do it. Also, if you never work from home, don’t try to claim all those Netflix gigabytes.

tax audit
Image via Comedy Central.

"Despite the concession allowing taxpayers to claim up to $300 of deductions without receipts," Chapman explains. "The ATO may still ask for proof that you actually incurred the expenditure, so be prepared."

  • Declare ALL your income.

You have to declare every bit of income you earn - yep, even those two shifts you did at Kmart last July. And if you run a business, not declaring all your income will act like a red flag to the ATO bull.

"If you run a small business and don’t declare all your sales," Chapman says. "The ATO will often identify that your business performs poorly compared to other similar businesses and thus, below the ‘benchmark’ for businesses in certain sectors.

"The ATO is looking particularly closely at cash-only businesses," he adds.

  • Make sure your income matches your lifestyle.

If you're buying bottles of Bollinger, driving a Porsche and claiming you're making minimum wage, the ATO is going to be suss.

"If you’re living a ‘ritzy’ lifestyle, but only declaring income of $10,000 on your tax return, expect the ATO to look closely at you," Chapman says.

The ATO will actually assess the assets you own and calculate the amount of income you would need to support your lifestyle - and if these things don't match - they might come knocking on your door.

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"As well as traditional sources of third part data like records of property purchases and sales, the ATO even scrutinises social media, so any images online of you enjoying a high life will come into play if your declared income is less than the tax-free threshold."

Lastly, if you're unsure about what you can and can't claim, Chapman recommends getting some professional help with your tax return. It might cost you a little bit in the short term, but you'll spare yourself a potential visit from the ATO, and ain't nobody got time for that.