As we approach the end of this financial year, we think it's timely to highlight again to our clients that the Tax Office has sounded a warning that it will be taking a closer look at claims made by individuals on their tax returns. This is in response to the ATO report released last year (for the 2014-2015 period) which revealed an $8.76 billion gap caused primarily by incorrect claims – by individuals – for work-related expenses and omitted income. This number is greater than the gap for the large corporations - which for the comparable 2014-2015 period was $1.8 billion.

We have had our first call from the ATO regarding what they call a Lifestyle Audit. These arise out of the ATO's data matching and sophisticated analytics enabling them to spot claims that are "kind of out of pattern with people's peers – ie people of the same occupation, at the same income level". They also utilise online social platforms as part of their monitoring – they look at people whose lifestyle does not appear to match their disclosed income.

We have mentioned this before, but the ATO will also take a tougher stance around over-claiming of rental deductions and the non-declaration of rental income. It's worth realising that the ATO's data collection activity includes gathering information on rental income from accommodation and sharing platforms.

The ATO has declared that they don't expect agents to audit every claim, but they do expect a judicious approach to handling claims. On individual tax returns, the ATO is particularly focussing on clothing and motor vehicle expense claims and identifying income from renting a room or renting a 'holiday home' that is not being used by the owner.

So, when we seek clarification or substantiation for your claims, it's for everyone's protection.