A lot of the finance industry will agree that the Australian Taxation Office (ATO) is more targeted and aggressive than ever. But it’s important that you don’t bolt for the panic button when the tax office sends you an audit notice.
Actions that catch the ATO’s attention include financial performance that is not comparable to your industry, poor record keeping, low transparency of tax affairs and large one off transactions to name a few.
If your business finds itself in the ATO’s firing line, you can follow these steps for a quick and relatively hassle free audit.
Take it seriously
It’s important that you take the audit seriously. If the ATO undertakes a review or audit, they generally have a set revenue target in mind. Therefore any ATO contact with you, be it a review, audit or ‘friendly educational call’ should be treated seriously.
Call for backup
If you are going to be audited you will receive a notice from the ATO outlining the scope of the audit. Do not do anything until you have spoken with your accountant. It’s also imperative that you do not try and take on the ATO solo. Allowing your accountant to handle the process from start to finish will mean a better outcome for all.
Know the type of audit
Do you know the type of audit you’re up against? Some audits involve a brief review of invoices, whilst a full audit takes an immense amount of time and documentation.
If you fail to provide the ATO with requested documentation, then the audit process will become significantly more difficult.
Keep up-to-date records
Poor record keeping is the biggest reason businesses find themselves in hot water with the ATO. Consider getting your hands on some accounting software and remember that you are responsible for any mistakes.
Owning up to known mistakes early can help reduce penalties. Save yourself the hardship in the long run and fess up to any known errors.
Cooperation is key
An uncooperative, cursory or even flippant attitude will ring alarm bells for the ATO and prolong the audit process. Meanwhile, a cooperative and well thought out response means you can take more control of the direction of the audit. In short, don’t leave the ATO to ‘fill in the blanks’.
An audit is never welcome, but by keeping your finances well organised, and communications clear with the ATO, you can reduce the inconvenience of an audit and get through it with a bit more confidence.
At BDH Leaders we pride ourselves on giving advice that best suits your business and personal finances.