If you are contacted by the Australian Taxation Office (ATO) for a financial audit, try not to panic.
If your record-keeping is in order and you have a trusted accountant like LDB on your team, the process can be easily managed.
Here’s what you need to know in the event that the ATO contacts your business for an audit.
What’s required and how to comply
The first step is to contact your accountant, who can explain exactly what the ATO is looking for.
They may require specific information to verify a claim and if they are satisfied with what they find, there may be no further action.
Tax is quite complicated and the ATO takes a very technical approach.
The ATO relies on parts of the legislation, which not all businesses would understand. Therefore, it’s good to have an expert who can help decipher some of the issues and understand what it is that needs to be provided to wrap things up quickly.
If the ATO decides to conduct a thorough investigation, you will need to provide tax officers with full access to your buildings, books and any other documents they request.
Your suppliers, customers and lenders may also be contacted. You should nominate your accountant or another professional advisor to be the liaison with the ATO.
Tips for preparing a business audit
It is important to review your bookkeeping before the audit begins.
Areas that are likely to be scrutinised are your income, deductions, Fringe Benefits Tax, Goods and Services Tax, Capital Gains Tax and superannuation guarantee contributions.
If you find an error, inform the ATO immediately, as this may reduce the penalties you incur.
Audit insurance and why you need it
Audit insurance covers the cost of your accounting fees in the event of an audit.
It’s a clever option for business owners, as accounting fees can add up while your accountant acts as the middle man between you and the ATO.
The cost of handling even routine enquiries from the ATO can run into the thousands, so it’s best to be prepared.
Sometimes the ATO will ask a lot of questions to seek to understand things, which can therefore wrack up fees for clients that will come as a bit of a shock to them.
The fee is on a scale, depending on the size of the business, and for an individual salary and wage-earner, it’s relatively low.
Prevention is key
LDB offers professional accounting services and advice about audits and audit insurance.
To find out more, please get in touch by phoning (03) 9875 2900 or filling in the contact form below.
