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Have you received a notification from the Australian Taxation Office (ATO) requesting a tax audit for your business? You might wonder how to prepare for the audit to ensure you don’t miss any crucial details.
Surviving a tax audit can be daunting, even for experienced business owners. Here are some tips to help make your auditing experience go as smoothly as possible. Take a few minutes to learn some tips on preparing for and surviving a tax audit.
Keep Accurate Records and Utilise Accounting Software
It’s crucial to maintain accurate and up-to-date records when it comes to preparing for a tax audit. If your data is incorrect or incomplete, the auditor may need to investigate further, which can prolong the process. Ensure your records are up-to-date and error-free. This will help the tax audit process go smoothly and be completed quickly.
One effective way to organise your records is by using accounting software, such as Xero, to store your data. The ideal accounting program should include the latest tax regulations, making compliance easier. Additionally, working closely with your accountant or a tax professional will help you stay on top of your business taxes.
Double Check Tax Return Entries
It is wise to review your tax return even if your accountant is capable of producing an error-free one. Checking the entries yourself ensures accuracy. When you manually enter data, the margin for error widens.
To prevent making inconsistent entries, consider using accounting software.
Keep Organised Records Dating Back Five Years
Typically, auditors will review the previous year’s tax return as a standard procedure. However, auditors may review tax documents and financial records from the past five years if your business is suspected of understating taxable income. Maintaining regular file organisation will allow you to quickly retrieve necessary documents at any time to support your claims.
Correct Errors Immediately
Fixing tax return mistakes can result in lower penalties by the ATO. However, it’s also crucial to understand what the ATO scrutinises during audits to be well-prepared for any future notifications. Here are some areas of your business the ATO will investigate:
- Accurate income declaration
- Claimed deductions, credits, or tax offsets entitlement
- Correct reporting and withholding of PAYG amounts
- Precise calculation and reporting of other tax obligations.
Remember, the ATO employs sophisticated systems that detect anomalies and suspicious transactions. Failing to pay the correct amount of tax can result in severe fines under ATO’s laws.
Stay Prepared for Tax Audits
By adhering to the tips outlined above, you can confidently sail through your tax audit with ease. However, if you still feel uncertain, seeking guidance from an accounting expert is advisable.
Condon Noller’s Tax Audit Retainer
Condon Noller has exciting news for its loyal clients! We have a new retainer offering a valuable service package worth $20,000 to assist with ATO tax audits related to forms we have prepared and lodged on your behalf.
Although many ATO audits are random and not caused by taxpayer error, the process can still be costly and time-consuming. Responding with the required level of detail and securing a positive outcome can be challenging, often requiring more time and effort than preparing the original form.
This is why we offer this retainer, which is not an insurance policy but a personalised alternative to tax audit insurance, exclusively available to our current clients. Opting into the retainer is purely voluntary, and participation is not obligated or expected.
If you are an existing client and we have prepared and lodged on your behalf, contact us to learn more about this amazing opportunity!