Australians are managing to avoid almost $9 billion a year in personal income tax — and the Australian Taxation Office is about to ramp up efforts to find those who make mistakes on their returns or deliberately misreport cash income.
Accountants who the tax office believes are inflating the returns of their clients in a bid to attract more business are also in the firing line.
It comes after tax office research revealed the so-called tax gap — the difference between what the tax office believes it should be collecting from PAYG Australians and what it gets through the door.
According to the tax office, more than 70 per cent of returns it randomly selected for review had one or more errors.
While the sums were, in most cases, small, across the nation’s 10 million taxpayers the shortfall was $8.7 billion.
Most issues related to work-related expenses, incorrect claims for rental property expenses and non-reporting of cash incomes.
ATO deputy commissioner Alison Lendon said about 93 per cent of the more than $137 billion in personal income tax collected in the 2014-15 financial year was paid voluntarily and with little intervention from the tax office.
Tidying up the small errors taxpayers made would reduce the tax gap.
“What we have seen is that most people make small, but avoidable, errors so we will ramp up our assistance to help those people understand their obligations and gets things right,” she said.
This is the second year the tax office has estimated a tax gap. Its estimate for the 2013-14 financial year was a gap of $7.5 billion.
Among work-related expenses the biggest issue appears to be clothing and cars, including cases where people had been reimbursed by their employer but still claimed a tax deduction.
The tax office has recently increased efforts to highlight potential issues for taxpayers.
Ms Lendon warned that those who deliberately did the wrong thing would be targeted.
The tax office also has tax agents in its sights, with the ATO looking at 150 this year as part of a four-year program targeting 500.
Tony Greco, from the Institute of Public Accountants, said agents were not auditors and had to rely on the information clients gave them.