A business owner should pay serious attention to every transaction taking place in the company as tax mistakes can trigger an ATO tax audit. According to the ATO’s compliance program, they are going to be more active in reviewing and auditing practices. It is still possible for ATO to select your company for review despite detailed and honest declarations. When it comes to quick audits, the ATO completes an audit within 28 days. However, if it is a complex audit, the process may take up to 3 to 4 years. The process involves face to face meetings with the ATO and the financial records for up to five years will be requested. You may have proven your lodgements correct, the costs incurred are still considered significant. Being aware of the factors that can trigger ATO audit will not only save you from trouble but also help you develop some positive bookkeeping habits for your business.
Record-keeping is essential when it comes to filing tax returns. Compliance obligations are as equally important as lodging annual income tax returns by the due date. Compliance obligations may include employee related reporting, activity statements and fringe benefits. Having a good compliance history can improve the ATO’s perception of your business.
If you have failed to pay your employees the right amount of superannuation, they are going to complain to the ATO that will trigger a review or audit. The same is true when you fail to pay superannuation on time. These audits are considered a review of superannuation guarantee obligations, but it can also escalate to fringe benefits, GST and income tax audits. When you have not appropriately managed these processes, the ATO will audit your business.
This is the most common triggers of an ATO audit or review. Some discrepancies may include BAS and Payment Summaries on gross wages and PAYG withholding, income tax return and BAS on total expenses and sales and an income tax return and an FBT return on employee benefit contributions.
Your business should also focus on international transactions because the ATO also considers this as a key area of focus. Some examples are transactions with international related parties, materials funds transfers in and out of Australia and transactions with tax havens. These transactions can raise a red flag and one way you can manage the risk is by devising defensive strategies.
Peter Broberg is a bookkeeping professional with over 20 years experience in the finance sector. With more than 2 decades of experience, Peter provides payroll and bookkeeping services on a professional level. His services cater to small and medium enterprises in Cannington, Kalamunda.