Coco Hou: Top 5 tax return mistakes that will trigger an ATO audit this year

With the Australian Taxation Office (ATO) stepping up its audit efforts in 2025, Coco Hou, CPA and CEO of Platinum Accounting Australia, is urging all taxpayers to take extra care this financial year. Hou said the ATO is smarter and faster than ever before, using sophisticated data-matching systems and AI to spot errors, inconsistencies and fraudulent claims, often before a return is even processed.

"If you're cutting corners or fudging the numbers, the ATO will catch it," Hou said.

Hou outlined the top five mistakes that are likely to trigger an ATO audit.

Over-claiming deductions

"Claiming excessive deductions is the number one reason Australians are audited," Hou said.

"The ATO has systems to determine what is reasonable.   If an office worker claims $6,000 in car expenses, saying they use their car for meetings but they work from home full time and can't produce a logbook, this is a red flag.

"Or if someone claims a home office setup worth $4,500, but they have already received a tax-free allowance from their employer, this is another red flag.  Organisations submit details and information as well to the ATO on what benefits and payments have been provided to staff.  All of this data is reconciled."

Hou said if your deductions are far higher than others in your profession or income range, the ATO's systems will flag it automatically.  If you can't back it up with receipts and real evidence, you're in trouble.

Failing to declare all income

Leaving out income is one of the fastest ways to draw unwanted attention from the ATO.

"Deliberately omitting information such as income from other sources is a big red flag and downright stupid," Hou said.

"If a taxpayer forgets to declare $850 in bank interest from a savings account the ATO will discover this. Or if they earn $12,000 doing weekend Uber driving but don't include it on their tax return because it's a side hustle, the ATO will also identify this anomaly. 

"The ATO already has that data from third-party sources. Many Australians don't realise how much information the ATO already receives, from crypto exchanges, banks, rental platforms and employers. If it's missing from your return, it looks suspicious."

Late or inconsistent lodgements

People who skip a year or file late tax lodgements consistently are more likely to get audited, especially if they have fluctuating income or sudden increases in deductions.

"This is another area that the ATO focuses on.  If a freelancer doesn't lodge for three years, then suddenly files a return showing a big refund and thousands in deductions, or a taxpayer who usually earns $60,000 suddenly claims $18,000 in business-related expenses, these are red flags," she said.

"Lodging late or making inconsistent claims from one year to the next, raises alarm bells. Even if you're not doing anything wrong, the ATO wants to understand the sudden change."

Failing to report foreign income or assets

If you're an Australian tax resident, you must declare your worldwide income, not just what you earn locally.

"This is a big area of concern. For example, if a taxpayer sells a rental property overseas and pockets $75,000 but doesn't report the capital gain because it is outside Australia's reach, or they have foreign bank accounts generating interest that aren't declared, the ATO will know," Hou said.

"Data sharing doesn't just happen across Australia, it happens across countries as well.   Revenue organisations share information with each other to identify tax evasion globally.

"With data-sharing agreements in over 100 countries, the ATO will find out. It might take a year or two, but when they do, the penalties can be severe including being treated as deliberately evading tax."

Using dodgy or unregistered tax agents

Unregistered agents or 'cash refund' specialists who promise big returns often make aggressive claims that don't hold up under ATO scrutiny.

"People need to understand the importance of a good tax agent and why it is critical to work with someone who operates in a professional manner," Hou said.

"Often people turn to tax agents because they are recommended by a friend or they see advertising for a cheap tax agent who claims the maximum $3,000 in work-related deductions for everyone, regardless of job type.  The taxpayer gets a large refund, then months later, receives an audit notice, because the agent made false claims.

"If it sounds too good to be true, it probably is.  If your agent gets it wrong, you'll be the one who pays. The ATO doesn't care who filed it, they hold you responsible."

Don't risk being audited, take control now

Hou urged all taxpayers to seek advice from registered, qualified professionals and ensure they understand what they're entitled to claim and what they're not.

"The ATO's systems are highly automated and brutally accurate. You don't have to be rich to be audited, just wrong," Hou said.

"Getting your tax right isn't just smart, it protects your income, your reputation and your future."

About Platinum Accounting Australia

Platinum Accounting Australia is a leading national accounting firm that has been operating in Australia since 2008.  With a national footprint, the business offers a broad range of services for individuals and businesses of all sizes including tax planning, accounting, advisory and bookkeeping.   Platinum Accounting Australia also offers a highly popular and growing licensee program for bookkeepers and accountants to assist them to grow as part of a respected national network. 

www.platinumaccg.com.au