ATO tax audits: The ATO can get access to your bank records
If required, the ATO can and will get access to your bank records for the purposes of auditing your tax affairs.
If you are under an ATO tax audit, you should contact King Lawyers immediately and get legal advice.
What bank information is the ATO usually interested in?
In an ATO tax audit, the ATO may be interested in the following information:
- Amounts withdrawn from a bank account
- Amounts deposited in a bank account
- Payments received electronically in your bank account
- Payments made electronically from your bank account
Once the ATO has all this information, the ATO can you ask specific questions about the relevant transactions.
What bank documents is the ATO usually interested in?
In an ATO tax audit, the ATO may be interested in the following documents:
- Bank statements
- Payment records
- Cheque butts
- Merchant facility statements for EFTPOS and credit card accounts
- Credit card statements
- Loan or lease agreements
- Deposit slips, books or records
If the ATO cannot get those documents from you during an audit, the ATO can get the documents directly from your bank.
Inconsistencies between your bank records and tax records
If the ATO is auditing your tax affairs, the ATO will be looking for any inconsistencies between the information you have provided to your bank in your bank documents and the information you have provided to the ATO in your tax documents.
For example, you may have lodged your tax return with the ATO and advised the ATO that your income for a particular year was $50,000. However, a few months later, you may have applied for a loan with your bank and told the bank that your income is $200,000 per year. In those circumstances, the ATO will likely question and audit your correct income for the relevant year. If the ATO then establishes that your correct income was $200,000 per year and you had previously provided false information to the ATO in your tax return, the ATO is likely to penalise you heavily for the incorrect information provided to the ATO.
Unexplained cash deposits in your bank accounts
When the ATO is auditing your tax affairs, the ATO will be very interested in any unusual, unexplained or cash deposits in your bank accounts.
If you cannot provide a satisfactory explanation to the ATO about the deposits in your bank accounts and cannot prove where the money came from, it is likely that you will have to pay tax to the ATO on those bank deposits.
How long are you legally required to keep your bank records?
If you are individual, you generally need to keep your bank records for a period of five years from the date of lodgement of the relevant tax documents with the ATO.
If you are a company, you generally need to keep your bank records for a period of seven years from the date of lodgement of the relevant tax documents with the ATO.
However, it is recommended that you keep your bank records indefinitely and keep a secure back up of those records in case the originals are lost or destroyed. In some cases where the ATO considers that there has been tax fraud or tax evasion, the ATO can come back and audit you after 10 or 20 years. Therefore, it would be best for you to keep your bank records as long as possible.
Legal advice from King Lawyers on ATO tax audits
This article is offered as general information only and should not be relied on as specific legal advice on ATO tax audits or record keeping obligations under the tax laws.
To get legal advice from King Lawyers on your specific circumstances, please contact us to arrange an initial consultation with our experienced tax lawyers.