Cash economy: The ATO has its own ideas about your living expenses

The ramifications of Australia’s “cash economy” is a pebble in the Tax Office’s shoe that it is constantly looking to dislodge.

One of the tools that it has developed to achieve this is a set of guidelines looking at an average taxpayer’s household expenses.

The Tax Office has made these guidelines available to the public to allow taxpayers to:

  • self-assess their potential for being selected for an audit
  • work out if they need to make adjustments to their expenditure and record keeping.

The Tax Office says its guide “explains the importance we place on examining taxpayers’ household expenditure when seeking to identify unreported cash income in the course of reviews or audits”.

Its Personal Living Expenses guide (download a copy here) includes sample worksheets for personal living expenses that it says it has developed from its feedback from the wider taxpaying population. It details the type of information the Tax Office looks for when examining household expenditure, although the Tax Office says that in the course of an audit it may seek even more detail.

Also available is a sample “concise personal living expenses worksheet” (download a copy here), which shows an overview of household incomings and outgoings. There is also a “comprehensive personal living expenses worksheet” (download this one here), which provides a more in-depth analysis.  Examples for both are also available (see the examples here).

The Tax Office states that by comparing annual household funds and expenditure, taxpayers can self-assess if their declared income will be deemed enough to support their actual lifestyle.