Australians over-claiming on their tax returns took almost $9 billion out of the federal government’s budget in just one financial year.
The Australian Taxation Office has published an estimate of the tax it collects and the amount which would have been collected if individuals fully obeyed the law.
While 93 per cent of income tax from individuals is paid voluntarily, the government missed out on in 2014/15 was 6.4 per cent – about $8.7 billion.
“Individuals are important contributors to our tax system. There are around 9.6 million individuals who are not in business and lodge tax returns,” Deputy Commissioner Alison Lendon said on Thursday.
The tax gap for individuals not in business is primarily driven by incorrectly claimed work-related expenses.
Common mistakes include claiming deductions where there is no connection to income, claims for private expenses, or no records to show that an expense was incurred.
Other areas of concern include high rates of incorrect claims for rental property expenses and non-reporting of cash wages.
“Seven out of 10 returns randomly selected for review had one or more errors,” Ms Lendon said.
What we have seen is that most people make small, but avoidable, errors.
“We are also asking people to take just a little extra care with what they claim because all of those little amounts add up.”
Ms Lendon said people deliberately doing the wrong thing can expect closer attention during tax time, with the ATO using data and technology to verify tax claims.
The amount of company tax estimated to be lost in 2014/15 was $2.5 billion, about 5.8 per cent of the total.
“The ATO will continue to focus on multinationals and large corporates, where in the last three years we have already made substantial progress from a strong base,” Ms Lendon said.