The ATO may adjust your tax return if it picks up any errors, omissions or inconsistencies — and with EOFY just around the corner, now’s the time to make sure everything’s in order.
It’s hard to believe we’re already approaching the end of May, but getting on the front foot with your tax planning is one of the smartest ways to reduce stress, stay compliant, and potentially improve your financial outcomes. Whether you’re a seasoned investor or just trying to stay on top of your obligations, early preparation is key.
Each year, the Australian Taxation Office (ATO) reviews thousands of tax returns, and unfortunately, many of them are adjusted due to common, avoidable mistakes. These can lead to amended assessments, penalties, and interest charges — and in some cases, trigger audits that go back several years.
To help you steer clear of those issues this EOFY, let’s look at the top two reasons the ATO may adjust your tax return — and how you can avoid them.
1. Lack of Substantiation
Substantiation is the backbone of any legitimate tax claim. In simple terms: if you can’t prove it, you can’t claim it.
The ATO requires taxpayers to retain records such as receipts, invoices, bank statements, and logbooks for at least five years from the date their tax return is lodged. These records must clearly show what the expense was for, who incurred it, and how it relates to your income.
And while this might sound straightforward, it’s one of the most common areas where people fall short. Receipts fade, get thrown out, or disappear into the black hole of your car, handbag, or inbox.
Property investors, in particular, need to be especially diligent. From the day you purchase a property to five years after you sell, you need to maintain a full set of records. This includes things like purchase contracts, loan statements, invoices for repairs and improvements, depreciation schedules, and more. These documents are essential to calculate and substantiate your Capital Gains Tax (CGT) obligations correctly.
If you can’t produce this documentation, the ATO may disallow deductions or adjust your CGT calculations based on their own data-matching systems. And if that happens, penalties and interest can quickly add up. Especially if the adjustment affects multiple years of your return.
💡Pro tip: Don’t rely on your accountant to store your receipts for you. It’s your legal responsibility to keep records, whether that’s in a shoebox or a secure cloud-based platform.
2. Miscalculation and Incorrect Apportionment
The second major reason returns are adjusted is miscalculation, particularly when it comes to apportioning expenses.
This is where things can get tricky, as even well-meaning taxpayers can make mistakes that the ATO is quick to pick up on. Some common pitfalls include:
- Home office expenses: If you’re claiming deductions for electricity, internet, or phone usage, you must clearly identify and apportion the work-related percentage. Guesswork isn’t sufficient, and the ATO often requests a continuous 4 week representative diary or log of usage.
- Logbooks for vehicle expenses: If you’re claiming car expenses under the logbook method, that logbook must be current (less than five years old) and reflect a typical period of use. Many people continue using outdated or incomplete records, which puts the entire deduction at risk.
- Redrawn loans: If you’ve redrawn funds from an investment loan for personal use, for a holiday or a car, you need to split the interest portion accordingly. Even if you later repay the personal portion, the interest still becomes non-deductible from the point it was used for private purposes.
- Capital vs. repairs: Claiming improvements as repairs, or claiming costs for initial repairs after purchasing a property, can also be problematic. Initial repairs are typically considered capital in nature and must be added to the cost base of the property, not claimed as an immediate deduction.
- Private use of rental properties: If you or your family use your rental property personally, even for a weekend, you’re expected to apportion all expenses accordingly. Many property owners overlook this, but the ATO has sophisticated tools to identify short-term bookings, travel patterns, and more.
In each of these cases, the errors may be unintentional, but they can still lead to adjustments, penalties, and interest.
So, What Can You Do to Stay Ahead?
The most effective way to stay compliant and to reduce the stress of tax time is to stay organised year-round. That means:
- Keeping accurate, real-time records of income and expenses
- Digitally storing receipts and documents so they don’t get lost
- Using logbooks, diaries, and tracking tools to meet ATO requirements
- Understanding how to apportion expenses between private and income-generating use
- Maintaining a clear paper trail for all property-related expenses, including renovations, loans, and depreciation
And if that sounds overwhelming, there’s a much simpler solution.
Let TaxTank Do the Heavy Lifting
At TaxTank, we believe tax doesn’t have to be a guessing game. Our platform was built specifically to make tax management easier, more accurate, and more transparent—whether you’re a property investor, sole trader, or employee.
TaxTank helps you:
- Track your income and expenses in real time
- Store receipts and records securely in the cloud
- Understand exactly what you can claim and how to split costs correctly
- Stay audit-ready year-round, not just at tax time
With ATO scrutiny increasing and data-matching becoming more sophisticated, now’s the time to ditch the shoebox and upgrade your tax game.
Because let’s be honest—tax is complicated enough without trying to piece it together from memory.
Get ahead of EOFY with confidence. Try TaxTank and make this your easiest tax year yet.
