with Penny Pryor
It's that time of the year again. When we dig out our shoeboxes of receipts and terrorise our accountants in the hope of a tax refund of a few thousand dollars. If you're expecting a big one, and in need of cash, you may have already visited your tax agent with dollar signs in your eyes.
Those of us who use an accountant do so in the hope they will be able to maximise our (legitimate) deductions and get us the best possible refund. Unfortunately, if they are wrong, they won't be in trouble - though they will probably lose your business - you will be.
To make sure you don't wind up on the wrong side of the Australian Taxation Office (ATO), Stephanie Caredes, tax counsel at the Tax Institute, says you should always use a registered tax accountant. She says they have a lot of experience: "They will know the ins and outs of the tax law."
Registered tax accountants need to be registered with the Tax Practitioners Board and you can search their database to make sure your accountant is registered at tpb.gov.au/tpb/agent_register.aspx.
And how carefully do you look at what your accountant has done when they hand back your tax details to look at and sign? Not too many of us go over every line with a fine-toothed comb unless, of course, we think they might be missing a vital expense we could claim.
"Individual taxpayers should check over, and make sure they are comfortable with, their tax return," Caredes says.
Each year, about this time, the ATO makes it clear what it will be focusing on in its "Compliance in focus" reports. It doesn't mean that they won't be examining everything or everyone, just that these areas will get particular scrutiny. Most of us try our best to work within the law - I hope - and endeavour to do the right thing all the time, but these are the areas of which you should be taking special notice.
This year "incorrect work-related expenses claims" are on the list, with attention paid to high claims made by building and construction staff - labourers, supervisors and project managers; and sales and marketing managers.
The ATO also pointed out that it's getting very good at data matching, or pairing up what you say on your tax return with the information they get from "banks, share registries, employers, merchants, states and territories and other government departments". The ATO uses this information to pre-fill returns, which means they can detect anomalies pretty quickly. It says that last year this practice resulted in a $947 million gain from revenue adjustments from about 445,000 reviews and audits.
If you do make a mistake on your tax return, not only will you have to pay the extra tax but also, in some instances, you may have to pay fines as well.
Most false or misleading statement penalties are a percentage of the shortfall amount. The ATO also calculates fines in penalty units, where one penalty unit is $170 (or $110 if the infringement occurred before December 28, 2012).
But if you and your accountant can show the ATO you took reasonable care, penalties may be waived under safe harbour. "For safe harbour to apply, you need to prove that you gave all relevant tax information to your registered agent so that the statement could be made correctly," the ATO states.
So don't think you'd never get caught out by the Tax Office: you could, and the buck would stop with you, too.
David Potts is on leave.