The Australian Tax Office wants to make sure that all businesses truthfully declare their income and correctly state their entitlement to deductions and credits. Toward this goal, the ATO states that they are engaging more with business tax payers before lodgement, as a way of helping these companies comply with all obligations. Skilled accounting help can reduce your contact with the ATO and lessen your likelihood of an audit.
Why do SME businesses get audited?
The most common discrepancies that warrant the concern of the ATO are the following:
- Inaccurate or missing BAS (business activity statement) lodgings.
- Reporting GST amounts that are noticeably different from other similar businesses: When you file your tax return, you have to state the industry to which your business belongs, and the ATO will compare your financial results with the average for your industry.
- Disagreements between BAS lodgements and information provided on your tax return. The ATO utilises a variety of data-matching analytics in order to cross-check these two documents.
- International business transactions
- Complaints by employees about improper superannuation payments.
- Random selection by ATO system
- Operating at a unsubstantional loss or low income level
How to handle an ATO Audit
In their effort to be efficient, the ATO conducts many brief audits by first advising the authorised contact via phone, which is followed up by a formal letter and lastly a meeting. They initiate these contacts when there is an anomaly in filing, such as a missing form or contradictory information. If the result of this interaction leaves the ATO feeling unsatisfied, or if your initial lodgement contains significant discrepancies, the tax office will require a more in-depth in-person audit. Maintaining complete financial records for the past 5 years is the best way to handle a tax audit. Most small and medium-sized businesses find it helpful to engage an outside accountant or tax preparer, since a skilled professional provides the security of knowing that business tax obligations are being properly met.
What needs to be done to minimise your chances of being audited
Your primary route to avoiding audits is to make sure that all information is supplied to the ATO by the necessary deadlines, and that all employee superannuation’s are fully paid on time and accurately reported. You need to choose a proactive accountant who will remain aware of ATO reporting times, and will accurately assess the profitability of your business on BAS lodgements. Your accountant should also conduct a cash-flow analysis and substantiate any tax losses that you claim.
Since paying taxes is an unavoidable part of doing business, it makes sense to reduce your stress by handling your finances in a fully compliant manner. A skilled accountant will remove all audit-related anxiety by being prepared to satisfy any audit inquiries quickly and completely.
These are the thoughts and opinions expressed by Kris Prasad.