We all want to avoid an audit by the tax office; even if the ATO finds everything is in order, for businesses, in particular, an audit can mean lost time and money. There’s really no way to completely avoid the ATO choosing your business to audit, and we know that each year they seem to target a different niche and focus on a particular type of query.

However, there are some things you can do to lessen the chances of drawing the tax office’s auditors attention.

Are Your Expenses Uncharacteristically High?

If a business’s expenses are high compared to their turnover, it could be thought that the business is not declaring cash income.

Data Discrepancies

The ATO often investigates differences between data provided, e.g. income tax statements and employee benefit statements. The ATO uses data matching software to pick up such discrepancies.

Consistently Lodging Tax Returns Late

There are many reasons for getting annual tax returns done on time – this is just one of them!

Employee Superannuation Not Up To Date

If an employee complains they have not been paid superannuation properly, this can extend to a wider audit.

Business Cars/Equipment Constantly Run At A Loss

Your accountant can help work out what should and cannot be claimed. If business equipment is constantly running at a loss, this may suggest you are claiming more than you ought to.

Your business is performing well over or under industry standards or the business’s fortunes fluctuate widely from year to year

The ATO benchmarks businesses against other businesses in the same sector. If there are big differences between one business and the industry averages, the business could be investigated. It’s also a good idea to spread profits and losses over a number of years, for many reasons – this is just one of them. Our team at Hart Partners can help you do this.

International Transactions

If a business does a lot of international transactions, the ATO might look a little closer to check that everything is in order.

While we can’t promise you’ll avoid being audited, our experienced tax accountants at Hart Partners can help to lessen the chances by helping businesses throughout Australia to work through the details.

Most importantly, businesses must keep records of everything claimed as they may be called for in the audit.

If you are audited…

An audit usually starts with the ATO requesting your source documents to check all is in order. Sometimes it might progress to a detailed analysis of your business transactions and arrangements. The tax office tries to be open on what has caught their eye and does generally provide opportunities to correct any mistakes and provide further information if needed.

Should you be concerned that your business may be being targetted by the ATO for auditing, or if you realise that now is the time to get your accounts in order, we invite you to call Hart Partners today. Wherever you are in Australia, we can help you to meet your obligations to the Australian Tax Office, while at the same time ensuring that you claim every deduction to which you are entitled.