1. Never ‘back-date’ documents
2. Only claim what you know is a genuine tax deduction
3. Declare all of your income
4. Don’t estimate your deductions, and always double-check figures and numbers before you submit your tax return
5. File your tax return on time in order to avoid penalties

• Don’t freak out. You are innocent until proven guilty
• If you have done the wrong thing then fess up to the ATO straight away and limit the damage
• Keep your receipts and have them all in order and ready for the tax office
• Make sure you have a depreciation schedule from a quantity surveyor if you are claiming depreciation for rental properties
• Have a 13-week log book for car deductions
• Seek professional advice from a tax lawyer/accountant who has experience in dealing with ATO tax audits
• Get everything prepared in advance – bank statements, records, invoices and receipts
• Be honest, and explain anything relevant in as timely a fashion as possible
• Don’t sign anything until you fully understand the document, and agree with the conclusions that it has come to
• If necessary, seek a payment plan or a retraction of penalties

16 serious mistakes that would trigger an ATO audit

1. Estimating rather than getting the actual figures
2. Claiming a deduction for interest on the private portion of the loan. The interest expense must be apportioned between the ‘deductible’ and the ‘private’ portion of the total borrowings.
3. When depreciating assets, new assets acquired for less than $1,000 during the year are allocated as ‘low cost assets’ to the pool but the decline in value for these assets in the first year is at a rate of 18.75%, or half the pool rate. Halving the rate recognises that assets may be allocated to the pool throughout the income year and eliminates the need to make separate calculations for each asset based on the date it was allocated to the pool. For subsequent years they are depreciated at the normal pool rate of 37.5%.
4. Claiming initial repairs or capital improvements as immediate deductions. Initial repairs to rectify damage, defects or deterioration that existed at the time of purchasing a property is generally capital and not deductible, even if you carried out these repairs to make the property suitable for renting. However, it may be claimed as capital works deductions over 40 years.
5. Not showing dividends from dividend reinvestment plans in your tax return
6. Claiming a deduction for the cost of travel when the main purpose of the trip is to have a holiday and the inspection of the property is incidental to that
7. Not having receipts to justify the deductions you are claiming, and you cannot justify the connection between the expense and deriving the income (eg, it was for a private purpose).
8. Omitting overseas income – taxpayers are subject to tax on their world-wide income and the ATO has agreements with over 42 countries with data-sharing.
9. Claiming deductions for a rental property that is not genuinely available for rent, ie, a holiday house
10. Incorrectly claiming deductions for a property that is only available for rent for part of a year
11. Incorrectly claiming deductions for a rental property when it has been used by relatives or friends free of charge for the part of the year. A deduction is not allowable for the periods involving that free occupancy.
12. Incorrectly claiming for the cost of land in a claim for capital works. Only the original cost of construction is included in the calculation and the cost of the land forms part of the cost base when calculating a capital gain or loss.
13. Incorrectly claiming deductions on depreciating assets that are only eligible for a capital works deduction
14. Incorrectly claiming a deduction for conveyancing costs when they should form part of the cost for capital gains tax purposes
15. Incorrectly claiming all deductible borrowing expenses greater than $100 in the first year they are incurred instead of spreading over five years or over the term of the loan, whichever is less
16. Not splitting the income and expenses in line with their legal interest in a property where purchased by a husband and wife as co-owners