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The 3 big reasons you might be selected for an ATO audit


The last thing anyone wants is to be audited by the ATO. Each year, the ATO reveals what they will be targeting when it comes to tax returns, but those things aren’t the only reasons you might be audited. One of the simplest ways to avoid an audit, or to ensure everything goes smoothly if you are audited, is to seek the advice of a tax accountant. It’s their job to know what you can and can’t claim, complete the forms and advise you accordingly. (See can a tax accountant really help you get a larger refund?).

It’s still your responsibility to ensure you give accurate information, including all the income you earn and don’t push it when it comes to deductions.  So what are some of the most common reasons you might be selected for an ATO audit?

1. Claiming deductions you’re not entitled to

As tempting as it can be to claim everything that Joe at the pub said you could, it may end up costing you. Each industry and occupation has its own allowable deductions, so just because your mate can claim something, doesn’t mean you can.  While some unusual deductions are allowed, including garden gnomes and dogs, it is your responsibility to know what you can claim and what you can’t.  Your tax accountant will be able to advise you on this.

2. Not declaring all of your income

The ATO has some of your tax return form already prefilled which makes it easier than it used to be. However, it is still up to you to ensure the details are correct. Capital gains from property and shares, undeclared foreign income, understating or omitting bank interest and not declaring all business sales (e.g. cash in hand income) are some of the common mistakes with declaring income. Be sure to keep accurate records of all your income and expenses, proper proof of everything and make sure you list it all on your tax return.

3. Living the high life

It’s fine to live like the Kardashians if you have their income. But buying yachts, luxury cars, antiques and other high lifestyle purchases can be a huge red flag.  The ATO uses data matching software to compare declared incomes with lifestyles.  This means their software connects your spending habits and the lifestyle you’re living with what you declare on your income. Living well beyond your means, or appearing to live well beyond what you should be able to afford, may bring you under suspicion. This doesn’t mean you can’t have a great lifestyle. It simply means if you are trying to hide your income or are doing the dodgy on your tax return but living it up, the ATO will find out.

So what can you do to avoid an audit?

As long as you keep accurate records and are honest, you should be fine.  To ensure you are covering all your bases, claiming what you are entitled to and getting the most back you can, get professional tax advice.  The difference between having a tax professional advise you compared to doing it yourself can be thousands.  Wouldn’t you rather have that money in your pocket?


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Our response to limit the spread of COVID-19

  • As COVID-19 continues to spread, we would like to take a moment to let you know what Financial Spectrum is doing to respond.

    While we haven’t been directly affected with any confirmed cases, we are taking all reasonable precautions to remain safe.Our priorities are:

    1. Keep our staff and clients safe
    2. Stay fully operational in our service delivery and continuing to manage your financial affairs
    3. Play our part in minimising the impact on our community against the spread of COVID-19

    Financial Spectrum has the technology, infrastructure and systems to continue business as usual remotely and our staff will now be working from home.

  • You should notice no change to our service, with the exception that we are encouraging our clients to meet via video call, rather than face to face, unless requested. We will be contacting all clients with meetings booked over the next two weeks with instructions for a video call.This is an evolving situation and we will continue to monitor developments. We will keep you informed of any material changes to our approach.

    These are unprecedented times and we understand that many of you will be feeling unsettled about your finances. We would like to assure you that we are open for business and are here to help you. If you don’t have a meeting booked but would like one, or if you have questions, please contact us at info@financialspectrum.com.au or on
    02 8238 0888

Brenton Tong

Managing Director

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