ATO Follows Up on Unexplained Wealth of Small Business Owners
The ATO have indicated that they will be monitoring the “unexplained wealth” of small business owners, with a warning also being issued against those incorrectly claiming personal expenses as related to work or the running of a business.
The ATO are able to check any publicly accessible information to see if there are any inconsistencies between the declared tax income and this information.
Regulators are employing data mining techniques, such as accessing publicly available reports and documents, as well as checking social media accounts, to pinpoint irregularities.
This may result in a data-matching letter from the ATO. These are letters indicating that they have found a discrepancy between the declared income and their data-matching information.
The type of data-matching letter you receive depends on the discrepancy they find between the details on your tax return and data reported to them by employers, financial institutions, companies, health funds and government agencies.
Generally, a data-matching letter will relate to a tax return lodged more than a year ago. The tax office can only issue letters after they have received all relevant information from other organisations. Delays can occur as some organisations may take longer to report.
The data-matching letter will include a schedule showing information from your tax return, the relevant data they hold and the discrepancy.
What Should You Do?
1. Pay the Correct Amount of Tax
Sounds obvious, but sometimes mistakes occur. Make sure that you are paying the correct amount of tax for your business. One of our specialists in small business accounting at ATB can help you get this right.
2. Record all Income and Expenditure Correctly
A cloud based accounting system will help you easily record, claim and manage expenses and receipts online. Making sure you document everything makes it easier to remember where, what and when expenses were incurred. At ATB we are Xero Gold Partners and using this cloud based accounting system makes it easier to see your figures accurately and in real time.
3. Accurate Accounting Systems
Ensure all your accounting systems and processes are up to date. If your system is accurate, then any inconsistencies will be minimised and should they arise, they should be easily highlighted and explained.
4. Keep Financial Records
Maintaining records from previous financial years is incredibly important. You must be able to provide evidence when explaining any concerns raised.
ATB Work With You
Should you receive a data-matching letter from the ATO, don’t panic.
Generally the ATO are just wanting to know if something has been incorrectly reported. If you contact us, we can work through it with you to identify any inconsistencies and if there are any oversights in reporting, these can be corrected and we can advise the ATO of the mistake and why it was misreported.
We ensure that your systems are compliant with current tax legislation and requirements, making it easy for you to access your figures and reports in real time. The faster you can respond to a request from the ATO, with accurate financial records will show the ATO that you have the right systems and processes in place.
ATB accountants work with you, providing a complete financial solution for your business. If you’d like to discuss how ATB Chartered Accountants can help ensure your compliance with current tax regulations, please don’t hesitate to contact us.