Tax time is coming up, and there is one thought at the back of many small business owners’ minds is, ‘“What if I get audited?”
An audit doesn’t have to mean the end of the world but it will definitely put pressure on you in terms of time and money. This is why business owners rely on tax accountants to make sure they avoid the situation.
Ways to avoid an ATO audit
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Be prepared and lodge on time
The sooner you complete your tax return with the help of your tax accountants, the less likely you are to rush and fail to share the right information.
When you work with a tax accountant, you will actually have more time before you submit your tax return so it makes sense to reach out for help. They can also advocate to the ATO on your behalf if you are running late.
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Keep records and receipts
Before the ATO audits your business, they may approach you with a few questions for clarification.
You need to be ready to justify what you have included in your tax statement.
If you have all the records and documentation to support your claims and choices in your tax return, you can answer them honestly and quickly, and they will not feel the need to proceed to a more detailed audit.
This can be particularly important if you ever accept cash payments. Be very careful when keeping records of cash transactions and don’t take too many with the intention of not reporting your total income because it can be quite obvious.
Read more: What is data matching?
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Check the benchmarks
Sure, claim anything and everything you can, but keep it within reason.
If you push things too far, the ATO may pick up on your expense claims and come calling.
Be sensible and thorough on your tax return with the help of your tax accountant. The ATO assesses tax returns by taking your industry’s benchmarks into account and evaluating the amounts you’re claiming within those benchmarks.
When they find amounts that sit above the usual benchmark for your industry, that’s when alarm bells are triggered, and you might be in for a review. Your tax accountant can provide information in this area.
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Pay your employees super
There are laws in place for superannuation payments, and you need to ensure you abide by them. With the introduction of Single Touch Payroll (STP) a few years ago, it is easier than ever for the ATO and employees to monitor superannuation payments. This means failure to pay or consistently late deposits will be noticed.
If you fail to pay your employees super or pay them constantly late, your employees may raise concerns with authorities and you could find your business costs up for review.
Pay on time and your employees will have no reason to seek help from the ATO.
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Be prepared to justify expenses
Technically you can claim any expense as tax deductible, so long as it is relevant to your business (with a few exceptions). However, you need to be able to explain the connection. For example, if you have flown to Los Angeles and claimed it as a work expense, the trip needs to legitimately be for work. If you’re worried because you are breaking the visit into half work/ half pleasure, speak to your tax accountant about how much you can claim.
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Get help
Your tax accountant’s job is to ensure you minimise the tax you pay and present a clear and accurate statement in accordance with reporting requirements. Working with one will help keep you out of the ATO firing line because there will be evidence you are getting professional help to get things right.
At the end of the day, you sign off on what is submitted, but a tax accountant can let you know if they are worried about red flags being raised.
Need help to prepare an accurate tax return and minimise your 2023/2024 tax bill? Reach out to Mobbs & Co today. We operate in Brisbane, Caboolture and on the Sunshine Coast.
