Understanding Common Audit Triggers

Audits are often triggered by inconsistencies, unusual claims, or patterns that stand out in your tax return. Here are some common triggers to be aware of:

Common Audit Triggers

1. High or Unusual Deductions: Claims that are significantly higher than others in your industry or income bracket.
2. Omitted Income: Failing to declare income from employment, investments, or side jobs.
3. Inconsistent Data: Discrepancies between your tax return and pre-filled data from the ATO.
4. Frequent Amendments: Regularly correcting errors or amending past returns.
5. Late Lodgements: Consistently lodging returns after the deadline.

Industry-Specific Risks

• High Cash Transactions: Certain professions or industries, such as hospitality or retail, may face more scrutiny due to the prevalence of cash payments.

ATO Algorithms and Data Matching

• Advanced Technology: The ATO uses data-matching algorithms to compare your information against third-party data sources, such as employers, banks, and government agencies.

While some triggers are unavoidable, accuracy and transparency in your tax return can significantly reduce the likelihood of an audit. The Cado Tax app helps ensure your data is accurate and compliant.

To avoid common pitfalls, review our Common Tax Return Mistakes guide.

FAQs

Can claiming too many deductions trigger an audit?

Yes, claiming excessive or unusual deductions compared to others in your income bracket or industry can raise a red flag with the ATO.

Does a high income increase the likelihood of an audit?

Higher income earners may face more scrutiny, but audits are generally triggered by inconsistencies or unusual claims, not income alone.