The ATO has released its latest findings on the tax gap for Australian individuals. The estimated gap in 2014-15 is approximately $8.7 billion or 6.4 per cent.
The income gap is an estimate of the difference between the tax the ATO collects and the amount that would have been collected if each taxpayer was fully complaint.
Over 93 per cent of income tax received from individuals not in business is paid voluntarily or with little intervention from the ATO. There are around 9.6 million individuals who are not in business and lodge tax returns. These taxpayers earn their income from salary and wages and investments.
The tax gap is primarily driven by incorrectly claimed work-related expenses. The ATO says the most common mistakes include:
– Claiming deductions where there is no connection to income
– Claims for private expenses
– No records to show that an expense was incurred.
Other areas of concern include high rates of incorrect claims for rental property expenses and non-reporting of cash wages.
The ATO is warning taxpayers to take care with that they claim, because all of those little amounts add up.
The Tax Office uses data and technology to identify outliers, as well as tailoring advice and guidance products, auto-correct mistakes, streamline reporting and substantiation processes, access third party data to verify claims and provide pre-fill information in tax returns.