More than a million ordinary Australian taxpayers on wages or salaries will be subject to interventions potentially leading to full audits, the Australian Tax Office has warned.
If you’re one of the almost 10 million Australians employed by a business or company, and you claim work-related tax deductions on your tax return, then you are in the ATO’s sights.
The federal taxman revealed on Thursday that Australians who don’t run their own business, and gain their income through wages or salary from an employer, were withholding around $8.7 billion in tax from the government.
That $8.7 billion “income tax gap” accounts for 6.4 per cent of tax revenue paid by taxpayers that are “not in business”.
The ATO claimed taxpayers were hanging onto this money by claiming tax deductions they were not entitled to claim.
In a statement intended to frighten taxpayers off cheating or cutting corners – or simply making mistakes – on their tax returns, the ATO said about one million of these “not in business” taxpayers would be randomly selected for an audit.
This is how the ATO phrased it: “This year, the ATO expects to undertake over one million interactions with taxpayers and tax agents claiming work-related expenses – encompassing everything from help and education through to reminders, reviews and audits.
“Appropriate action to close the gap will increase the trust and confidence in the tax system.”
Majority of tax returns contain mistakes
The ATO claimed that 70 per cent of randomly selected tax returns with deductions contained “one or more errors”.
“What we have seen is that most people make small, but avoidable, errors so we will ramp up our assistance to help these people understand their obligations and get things right,” deputy commissioner Alison Lendon said.
“But we are also asking people to take just a little extra care with what they claim, because all of those little amounts add up.
“A smaller number of people are deliberately doing the wrong thing – that has a significant impact on revenue. These people can expect closer attention from us, especially this tax time.”
Tax revenue breakdown
The Australian Bureau of Statistics reports that in the 2016-17 financial year, the federal government took in a total of $390 billion in tax revenue.
The vast majority of that – $281 billion – came through taxing the incomes of individuals and businesses.
Of that $281 billion, individuals contributed the vast majority, at $199 billion.
Businesses, meanwhile, contributed just $72 billion – in other words, individuals contributed almost three times as much as businesses.
Consumers were further taxed through the Goods and Services Tax (GST) to the tune of $63 billion.
Per capita, Australians contributed on average $15,985 each to the federal coffers – though in reality, wealthier individuals will have contributed much more than this, and less wealthy people much less.
Last month, the Turnbull government passed legislation that will give all Australian taxpayers a tax cut – worth just over $500 a year for middle-income earners, and as much as $7000 a year for the nation’s wealthiest taxpayers.
The Turnbull government also wants to slash the company tax rate from 30 per cent to 25 per cent. So far, this plan has been blocked in the Senate.
The government is expected to revisit the company tax cuts after the winter break.