McKern News

ATO v Taxpayer - an example of ATO investigations..

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Our office has recently been advised of a recent case involving the ATO and 2 taxpayers. This example demonstrated the current path that the Tax Office are taking with investigating tax payers financial situations and penalising for mistruths.

The Facts:

  • A couple reported modest earnings in their 2000/01 to 2003/04 Tax Returns, however at the same time managed a property portfolio worth in excess of $3.6M.
  • The Tax Office requested evidence to substantiate the taxpayers income claims, at which point the Taxpayers provided 'bogus' information and stood by their original lodgements.
  • The ATO proceeded to use 'Assets Betterment Analysis' which effectively determines what income the Taxpayers needed to receive in order to have maintained their portfolio and grow to its current position.
  • The ATO then took their calculations and issued an amended assessment to this amount and also applied a penalty of 75% for evasive intention to under report their income.

In this circumstance the ATO have the power to issue amended assessments with no concrete evidence as the onus is on the Taxpayer to prove the ATO is incorrect, not the other way around. This can prove to be an extremely expensive exercise and highlights the importance of being compliant with the Tax Office now more than ever.

This article was written by Brad Platt, a Senior Accountant. Brad completed his Bachelor of Commerce at Newcastle University before relocating to the Southern end of the Gold Coast and has been with us at McKern & Associates for the past 6 years. Brad enjoys family time, participating in many sports and being active in general!