During an audit, the ATO requests information to help identify unreported cash income when looking at household expenditure.
When making an assessment in the course of examining an individual’s tax affairs, the ATO follow assessment guidelines that are presented in the form of questionnaire worksheets. These worksheets require taxpayers to provide particular details about the living expenses of their household. An individual may also be required to provide information to determine if they need to make adjustments to their business and record-keeping practices.
The questionnaire worksheet outlines what the tax office looks at when examining personal living expenses. The worksheets can be used at any time by individuals to:
• Compare their household income to expenses and assess if their declared income is enough to support their lifestyle.
• Review their record keeping.
• Make adjustments to their reported income.
• Consider whether making a voluntary disclosure is necessary.
Discrepancies in tax returns that have been discovered by individuals can be adjusted through voluntary disclosure. Making a voluntary disclosure will enable correction of tax affairs without admitting liability. Individuals would still have to pay any tax owed, interest and penalties applied. Taxpayers that voluntarily inform the ATO of mistakes before an audit may be eligible for reduced penalties.