I have heard countless times from friends “I have the best accountant. He claims all my personal expenses and I get amazing refunds”. My rebuttal is always the same “You realise they take no risk and the responsibility is yours to substantiate those deductions if you are ever audited?”
We all know the drill. A new mobile phone? Here are 10 pages of small print that you need to agree to. Sign up for insurance? Press ‘1’ to agree to our terms and conditions. On a regular basis we are required to sign standard terms and conditions and after a few years most people just stop reading them. Accountants are no exception. The only difference is that you are signing a standard form that says your tax return is correct and there is evidence to back it up. This immediately shifts responsibility to substantiate your deductions from the Accountant to you.
A mate of mine had just joined the NSW police and went to the US for a month, had a boozy trip and saw all the attractions. He gloated about how his accountant recorded his whole trip as a deduction. Included in his deductions were all his tolls to and from work, depreciation of his car as well as a few other expenses he never incurred.
I was still studying my degree at the time but I still knew he was putting himself in a large amount of risk. He said “I don’t care the Accountant did it so I will be O.K.” Unfortunately, if the ATO ever did a spot audit on him for that year he would be in strife.
Its important to understand an Accountant is not good just because they give you the largest return. A good Accountant is one that gives you the largest return based on fact not fiction. It is the difference between tax evasion (Illegal) and tax minimisation (legal).
The ATO are improving their compliance tools every year with data matching from countless sources. You may have even received mail from the ATO saying your deductions have been higher than others in your profession. The tools are getting more advanced and the penalties are just not worth the few extra dollars you may get away with. So the next time you sit down with your Accountant just remember what they do is what you need to prove.
Get your Tax Returns done with us at Top Tier Accounting!
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