An ATO “living expenses” tool to tackle the black economy

 

It’s known by a variety of names, such as the black economy, or even the cash or hidden economy. But whatever the label, its existence is a pebble in the ATO’s shoe that it is forever looking to prise out. As part of that ongoing effort, the revenue agency has settled upon different sets of what constitutes reasonable “personal living expenses”.

In the event of an audit, or even when making an assessment in the course of examining a taxpayers tax affairs, one of the tools that the ATO may employ is a set of guidelines looking at an average taxpayer’s household expenses.

The guidelines are presented in the form of questionnaire worksheets, where taxpayers are asked certain details about the living expenses of their household.

There are two worksheets; a concise one and a more detailed comprehensive worksheet. Each outlines what the ATO will generally look at when examining a taxpayer’s personal living expenses.

The ATO also says that practitioners can find the worksheets useful in helping clients review the accuracy and completeness of their record keeping. It says they can also be used at any time to:

  • compare a client’s household income to expenses and assess if their declared income is enough to support their actual lifestyle
  • review their record keeping
  • make adjustments to their reported income
  • help in considerations of whether making a voluntary disclosure is necessary.

The concise personal living expenses worksheet reveals a snap-shot of household incomings and outgoings. Significant outgoings only are deducted from income and the remaining amount needs to be enough to cover your other household expenses. Download the printable version here.

The comprehensive worksheet provides an in-depth analysis of all household incomings and outgoings. By comparing annual household funds and expenditure you can self-assess whether your declared income is enough to support your actual lifestyle. Download the printable version here.