Basmah Qazi

Money & Banking

What to do if you receive this threatening letter from the ATO

What to do if you receive this threatening letter from the ATO

Australian tax payers are being hit with threatening ATO “data matching” letters and are being advised to act quickly or face being thousands of dollars out of pocket.

With the introduction of sophisticated technology, tax men are now able to sift through mountains of data from third-party institutions such as banks to see if any information, like sales or shares of property, are being excluded from people’s tax returns.

Each year, an increasing number of Aussies are receiving “please explain” letters, in a bid to raise over $1 billion in revenue by cracking down on dodgy claims.

According to Etax, once the recipient is given the letter, they are under a time limit.

“What it means is the taxpayer has lodged a return either current or up to two years ago, and now the ATO has done some data-matching with third parties and decided that something on the return is incorrect so they send out a letter,” said Etax senior tax agent Liz Russell.

“Once you get that, quite often people can freak out or get concerned, they might stick it in their drawer and hope it goes away. But if you don’t address it within the time frame, usually 28 days, the ATO will raise an amended assessment based on the information they believe to be correct and in some cases, issue a penalty for overpaid refunds.”

Ms Russell revealed that due to companies providing more information, the ATO has been able to investigate tax returns from years ago as previously, that data was unavailable.

“I’ve seen them go back four years,” she said. “It doesn’t have a lot to do with deductions because deductions aren’t things they can data match. It’s things like dividends, shares, sale of rental properties, missing PAYG summaries.”