Tradies’ and sales & marketing managers are on the ATO’s 2013-14 hit list.

Of major concern to the ATO in 2014 is un-declared income and “incorrectly claimed” work expenses.

Un-declared income

The ATO continues to build a strong data matching system. This processed was assisted last year with the introduction of a reporting system for building contracts – ie to report payments made to sub-contractors directly to the ATO.

Another weapon used in this area is “benchmarking”, where the ATO compares tax return information with industry standards to identify anomalies. For example, is the percentage of material costs high for income declared. See this post for an explanation and checklist of benchmarking.

Work expense claims

The ATO has said they will pay attention to high claims made by building and construction labourers, construction supervisors and project managers. The following is a checklist of areas that will be targeted:

• high work-related travel expense claims
• poor record keeping
• incorrect advise
• deliberately false claims
• basic errors.

The ATO says “Where a person has made an error due to poor record keeping or a misunderstanding of the law, we work with them to correct their tax return and to improve their understanding of their obligations. Where a person has deliberately lodged a fraudulent return, penalties will be imposed and prosecution will be considered.”

Employee or Contractor

Closely tied to tradies is contractor arrangements, another area of ATO concern. There has been a growing trend of contractors (payers) forcing workers into company or trust structures in order to avoid costs and compliance of Superannuation Guarantee and Workcover. These activities can expose some sub-contractors to liability (ie tax, penalties and interest) due to poor or no bookkeeping systems/compliance. I have seen tradies fall into this trap resulting in years of non-lodgment and, when compliance is forced onto them, an unmanageable tax debt. See this post for a discussion on Are you and Employee or Contractor.

I recall a situation some years ago as a tax consultant for a local accounting practice. The practice owner instructed the consultants to claim certain expenses for meat industry workers that I didn’t feel was correct. Word got out and the practice had meat workers travelling hundreds of kilometres to get there tax returns done and receive a big refund. The outcome was the ATO adjusted all of these claims and these meat workers had to repay some refund with interest and were understandable not happy. What this showed me was, these normal hard working people disliked the pain of the ATO adjustment more than the joy of the extra refund.

At Maynard Accounting, we have the genuine qualifications, knowledge and experience to get you the best refund and help you comply with your tax obligations and keep you “out of trouble”.