Preventing ATO Audits

The Australian Taxation Office are constantly increasing the level of compliance they undertake. This effectively increases the risk that taxpayers will get reviewed or audited. However don’t let that scare you. We are here to help. Here are some tips to prevent an ATO audit;

  1. Keep all receipts for any deductions you make.
  2. Ensure your log book or diary is up to date.
  3. If you are a business – keep within the Small Business benchmarks
  4. See a tax agent – only a professional can ensure you are meeting all your obligations.

A tax agent is a great source of information about the ATO’s compliance action. We generally keep up to date about what the Tax Office is focused on for compliance, what industries are getting targeted, and what you should avoid.  For example, for the 2015 year the ATO are sending a Certainty letter to taxpayers confirming their returns have been reviewed and no further action is needed. This action is a pilot program to 500,000 taxpayers. The taxpayers receiving this letter need not be concerned they have been targeted or reviewed.  There is a number of reasons an audit can occur, and every taxpayers circumstances are different. It may be industry related; I always ensure the industry selected is the most appropriate for the taxpayer, and therefore the deductions claimed are related to the industry.  Small Businesses should look to the Small Business benchmarks to ensure they are trading similar to their industry. The Small Business benchmarks are a handy tool to compare income and expenses to similar businesses, and a review can occur from being outside these benchmarks.  A bonus tip – ensure all your lodgements are up to date. A clean compliance history helps prevent any action, or reduces the pain if something does go wrong. For example if you lodge your tax returns all on time, and for some reason one year lodge it late, you may not get a penalty applied due to your good history. If you need help checking your lodgements are up to date contact us.