Minimise the Risk of an Ato Audit

Every year the Australian Taxation Office (ATO) is incredibly vigilant in ensuring that both businesses and individuals are paying the correct amount of tax owed to the government. The ATO gathers information from multiple sources, including banks who are required to give details regarding how much interest each account held by them has earned, and if suspicion is roused they may order an audit to closely examine your affairs and ascertain that everything is in order. These audits require a huge amount of work and the collation of extensive paperwork. They are time-consuming and often very stressful. Fortunately, ATO audits are our speciality. With years of experience, Pherrus Tax experts have the knowledge and skills to keep this process as hassle-free as possible for you or your business.

We’ll help in any way required, whether it’s a discussion over the phone, a letter or a visit from one of our Sydney business tax accountants or tax consultants. We’ll keep you fully informed and will take the time to explain the processes in detail so that you understand what needs to be done and what may come next. If we detect any missing information from your lodgements, we’ll get in touch and offer our advice on the steps to take to most effectively amend your assessment.

Furthermore, our tax specialists offer effective financial advice year-round to make sure that you are paying the correct amount of tax every quarter, and will therefore help you minimise the risk of an ATO tax audit. We’ll equip you with tax strategies so that you are making the most of your finances and are never paying more tax than you need to be.

The first thing to do when you receive correspondence informing you of an ATO audit is not to panic. It’s more common than you may think for the Australian Taxation Office to double-check the information you are providing to ensure all of your finances are in order. In many cases, this process doesn’t mean that ATO has found anything improper – they may just wish to clarify specific details or ensure your figures line up.

When you have an audit coming up, you’ll want to make sure you’re doing your due diligence to have all of your finances and information lined up and ready to go. Either preparing your details yourself or with the support of your accountant can put you in a good position for a quick, easy audit. The exact nature of an audit can vary from a quick check of your source documents to an in-depth deep dive into your transactions and deductions.

If you’ve received a letter for audit from the Australian Taxation Office, you may be wondering the reason behind the request. In most cases, receiving an audit letter is a result of the ATO’s data-matching technology finding discrepancies between the information provided on your tax return and other information that is available to them. This doesn’t necessarily mean there is a problem with your reporting, and in many cases, a quick resolution can be reached following your audit.

It is a requirement for you to respond to your ATO letter promptly and ensure you provide truthful accurate information. If you aren’t finding any problems or discrepancies with your finances on checking, you can report this back to the ATO. If you have done something incorrectly, whether due to user error or misunderstanding, this may be the cause of your ATO letter, and it’s crucial to resolve any issues as quickly as possible.

If you have received an audit letter and you’d like to reach out for ATO audit advice, the first people you may wish to talk to are the Australian Taxation Office itself. The ATO can be a helpful resource if you have specific questions about your audit, want to discuss the reasons behind your audit, or rearrange an appointment for your audit in the future.

If you want to seek advice from a professional ahead of your audit to ensure all of your finances are in order, the best person to talk to is your accountant. If you do not currently have an accountant, hiring a specialised accountant with experience in ATO audits can give you the advantage needed to understand your audit and prepare accordingly. Our team at Pherrus has extensive experience supporting our clients through ATO audits.

The ATO audit process can vary depending on what an auditor needs to check and the level of clarification they need about your financial details. All ATO audits start with a phone call, where a qualified professional will go over the basics of the audit and arrange a time and date for a visit on-site to your premises.

On the day of the audit, a qualified auditor will arrive on-site to review your finances and examine any potential issues. You will need to be available to answer questions and clarify information throughout the process, allowing for a smoother and quicker auditing process. In some cases, very little detail or information is required, while in others, a deep dive into financial data may be necessary. Once an audit is finalised, you’ll receive a letter providing information on the outcome and details of any interest charges or penalties that apply.

Want to avoid a tax audit altogether? The best thing you can do is keep your finances and all of your information in excellent shape, up to date and in line with necessary Australian Taxation Office requirements. While this doesn’t necessarily mean you will never receive an audit, whether, through mistake or error, you are far less likely to need to go through the process if you keep everything ordered and managed.

If you haven’t already, one of the best ways to improve your finances is to hire an external professional to support your financial administration and filing practices. A trained tax accountant can provide the guidance and expertise you need to meet necessary standards and responsibilities. The better shape your finances are in, the less likely you’ll ever receive that dreaded letter in the post.

Several factors can trigger an Australian Taxation Office (ATO) audit:
  • Unusual or inconsistent information on tax returns or activity statements.
  • Large or suspicious financial transactions.
  • Inconsistencies between reported income and third-party data.
  • Participation in certain industries or occupations prone to tax evasion.
  • Random selection as part of the ATO’s risk-based approach.
  • Information from third-party sources, such as banks or employers, indicating potential non-compliance.
  • Tip-offs or reports of suspected tax avoidance or fraudulent activity.

Yes, the ATO has the authority to audit your bank account.

They may request access to your financial records, including bank statements and transaction details, to verify income, expenses, and compliance with tax obligations.

While reviewing your bank account records, they will also check for any discrepancies or inconsistencies.

Yes, low-income earners can be subject to an audit, as the ATO focuses on identifying compliance issues across the entire taxpayer population. ATO audits are conducted based on risk-based selection criteria, which consider unusual deductions, inconsistencies, or information received from third-party sources about anyone in any tax bracket.

While avoiding a tax audit is not guaranteed, you can take steps to minimise the risk.

1. Double-check your tax return for errors or omissions.

2. Maintain thorough and organised records of your income, expenses, and deductions.

3. Stay up-to-date with tax laws and regulations.

4. Promptly respond to any ATO inquiries or requests for information.

5. Seek professional advice when needed.

By being diligent and proactive in meeting your tax obligations, you can reduce the likelihood of triggering an ATO audit.

Yes, the ATO may ask for receipts to substantiate claims made on your tax return, so keep receipts for all expenses, deductions, and income-related matters.

Such supporting documentation is also vital in case of an ATO audit.

Access to ATO records is limited to specific entities and individuals.
  • You: As the taxpayer, you have the right to review and obtain copies of your tax records and information by contacting the ATO directly.
  • Authorised representatives: Tax agents, accountants, or legal professionals can access your ATO records with your consent.
  • ATO employees: These employees have access to your records for official tax administration purposes.
  • Government agencies: Law enforcement agencies, regulatory bodies, or intelligence agencies may access ATO records in specific circumstances to ensure compliance with legal or regulatory requirements.
  • Auditors: Those authorised by the ATO can access your records for an ATO audit.
Privacy and confidentiality provisions govern the access and use of ATO records to protect your personal information.

To prove your identity to the ATO, you must provide two separate forms of personal identification, like your Australian passport, Australian driver’s license, Medicare card, or birth certificate.

Additionally, you may have to provide supporting documents such as utility bills, bank statements, or other official correspondence that verifies your name and residential address.

To access the ATO portal through the myGov website, you have to create a myGovID. To do this, you must prove your identity using your Australian passport, Australian driver’s license, or Medicare card, along with other supporting documents such as a birth certificate or citizenship certificate.

Once you’ve created a myGovID and password, whenever you log in, myGov will text you a confirmation code to complete the login process. Once logged in, you can access the ATO portal.

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