In the past several years the Federal Government has invested heavily in technology, expertise and resources for the ATO, to enable it to catch ‘tax cheats’ and stamp out the black economy which costs billions of dollars every year. This is no secret, and part of the overall strategy has been an increase in random audits.
Could you be next?
By Michael Mekhitarian
The ATO has just published the list of taxpayers that will be under the spotlight this year.
What does this mean? Well, it just means that your tax return will be scrutinized more than in recent years, and it could, potentially, result in an audit.
The common misconception is that you have to have done something ‘wrong’ for the ATO to conduct an audit of your taxes. This is not true. In recent years the ATO has been increasing the number of audits it undertakes.
This is not necessarily good news for Small Businesses or Investors.
In our experience here at ATB partners, most Aussies aim to do the right thing and pay their taxes on time. If anything, many don’t claim everything they’re entitled to. Australia’s tax system is incredibly complicated and those who don’t get specialist advice often don’t understand the full extent of the rules or the allowances available to them. (If you want to know more about tax strategies, take a look at our most recent webinar posted on YouTube.)
But that’s not the big problem. The big problem is actually dealing with an audit. It takes time and dedicated specialist resources to complete an audit with the ATO – time expertise and resources that small businesses – and individuals – don’t often have.
Most of our business clients are on fixed fee arrangements, and we don’t include audits whether that be from tax office, workers’ compensation or land tax payroll tax etc… The reason we don’t is because firstly, an audit might not happen, but secondly, there is no way to gauge with any accuracy the fees associated with an audit because it depends on the breadth and depth of the audit.
This is why it makes sense to get audit insurance.
Audit insurance is not expensive, but it will help to cover the cost of professional advice if you need it, so that the audit can be conducted as quickly and efficiently as possible, without impacting the general day-to-day running of the business.
And let me be frank about this, the chances of being audited are no longer really a matter of “if” …. And are increasingly likely to be a matter of “when.”
Whether you’re self-employed or running a reasonable-sized enterprise, it simply makes sense to have audit insurance. It also pays to get professional tax advice, not just so you can reduce your tax liability legally, but so that you have a professional onside if the ATO comes knocking, asking questions or needing clarification.
The ATO prefers to deal with professional tax advisors because we “speak the same language” and we understand the nuances of the system – it just means that any discrepancies or anomalies can be dealt with quickly and easily. A tax professional can help you understand how to better plan your tax payments, and often, a tax professional will be better placed to negotiate on your behalf if you need late payment relief, or to set up a payment plan too.
Let’s not forget that this tax year we’ll be reporting on the ‘Covid’ months – business lockdowns, JobKeeper, employees working at home, rental holidays and loan holidays are just some of the things that will impact what you can claim, and how you report.
It’s not too late to engage a professional for the 2021 Financial Year End, even though it’s just around the corner. We’re here to help and we’ve been working with SMEs for more than 20 years. Contact us at any time.