Most people don’t expect to hear from the ATO after lodging their tax return. You submit it, maybe breathe a sigh of relief, and move on. So when a review or audit notice shows up, it often comes as a shock.
The first reaction is usually: “What did I do wrong?”
But an audit doesn’t always mean you’ve done something illegal or even intentional. Sometimes it’s a simple mistake. Sometimes it’s just numbers that don’t quite match what the ATO expects.
So, what actually gets you flagged?
Let’s break it down in plain terms, without the tax jargon or fluff.
The ATO Isn’t Guessing
The ATO doesn’t just randomly pick tax returns out of a pile. They use data-matching, computer models, and industry comparisons to catch things that seem off.
If your return stands out, for the wrong reasons, that’s usually when they take a closer look.
Here are some of the key triggers.
1. Your Deductions Seem Too High
Say you work in admin and claim $3,000 in work-related expenses. That’s not impossible, but it’s much higher than what most people in similar jobs would claim. That difference alone can put a spotlight on your return.
If your deductions are unusual for your income or industry, the ATO might ask you to prove them. And if you can’t, things can quickly become complicated.
2. You Forgot to Include Some Income
This one happens more than people realise. Whether it’s freelance work, rental income, a casual job you had for a few weeks, or gains from crypto trading, leaving it out can trigger a review.
The ATO already has access to a lot of your income data. If your return doesn’t match what they’ve received from banks, employers, or platforms like Airbnb or Uber, they’ll notice.
3. Rental Property Claims Look Off
If you own an investment property, there are lots of deductions you can claim. But this is also an area where people often make mistakes.
Common issues include:
- Claiming for repairs that were actually improvements
- Deducting expenses for a property that wasn’t rented out
- Overstating interest or borrowing costs
If your claims don’t reflect how the property was used, or seem inconsistent with the income it earned, that could lead to a review.
4. Year After Year of Business Losses
If you run a business that’s been reporting losses for several years, especially if you’re also employed elsewhere, the ATO might want to know more.
They look for signs that it’s a genuine business, not a hobby or a way to offset income. If there’s no sign of profit or business growth, expect questions.
5. Your Spending Doesn’t Match Your Income
This one is more about patterns than numbers on a spreadsheet. If you declare a modest income but live in an expensive home, drive a luxury car, and travel regularly, the ATO might wonder how you’re funding that lifestyle.
Again, this doesn’t mean you’ve done anything wrong. But if they think there’s undeclared income involved, they’ll investigate.
6. You’re in a High-Risk Industry
If your work involves cash, like hospitality, construction, or beauty services, your risk of audit is naturally higher. These industries are more likely to have underreported income, whether accidental or deliberate.
The ATO has benchmarks for these sectors. If your income, margins, or expenses don’t fall within those benchmarks, that might raise a red flag.
7. Mistakes, Gaps or Late Returns
Filing your tax return late or submitting one that has missing information doesn’t help your case. Even small, obvious errors can cause the ATO to take a second look. If there’s a pattern of poor record-keeping or inaccurate details, the chance of review increases.
How Do You Avoid Getting Audited?
No one can guarantee they’ll never be audited. But you can reduce the risk significantly by:
- Keeping accurate records
- Only claiming what you’re legally allowed to
- Declaring all your income (no matter how small)
- Using a registered tax agent if you’re unsure about anything
In short, stick to the facts. Guessing, rounding up, or pushing claims that “should be fine” isn’t worth the risk.
What If You Do Get Audited?
Don’t panic. Many audits are simply requests for clarification or documentation. If everything’s above board, it can be resolved quickly.
If the ATO reaches out, respond on time and give them what they ask for. And if you’re not confident handling it alone, get help. A professional can deal with the ATO on your behalf and make sure you’re protected.
Final Thought
Most audits don’t happen because someone set out to do the wrong thing. They happen because of small errors, unusual claims, or numbers that don’t add up with what the ATO already knows.
So if you want to stay off their radar, focus on being clear, accurate, and honest in your tax return.
And if you’ve made a few mistakes in the past or aren’t sure whether something you claimed is okay, now’s the time to get it sorted.
Getting professional advice could save you from a much bigger problem later on.
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