At this time of year, when many business owners are finalising the prior year’s tax return, we like to remind them of the need for accurate record keeping as the ATO continues to ramp up its tax compliance activities.
Some $588M in funding was allocated in May’s budget to further strengthen the ATO’s resolve to achieve tax receipts, estimated to be around a whopping $9.1 billion over the next five years [1]. In this article we overview the ATO’s compliance focus and whether audit insurance is an investment worth considering.
In our experience, no one ever wants to draw attention from the ATO. The most effective way of remaining on good terms is remaining diligent when it comes to record keeping and complying with, albeit the many and often confusing, tax and superannuation compliance rules.
It’s been reported the funding will, amongst providing other resources, enable the ATO to recruit an additional 2000 staff to assist with their tax collection activities.
While the ATO has made clear they are looking to Australia’s largest businesses first, it would be fair to say ALL businesses are in their sights when it comes to tax compliance.
Areas of focus are likely to include trust activities, particularly around Division 7A, as the ATO has been warning about matters relating to unpaid present entitlements (UPS) for some time.
Fringe Benefits Tax (FBT) on expenditures, particularly relating to motor vehicles, will continue to remain in the ATO’s sights.
Again, sound record keeping is important because the ATO does scrutinise log books!
When it comes to super, we’ve previously written about penalties on late super guarantee payments and you can expect this too will remain an ATO focus.
Enhancements in data matching technology are assisting the ATO to identify anomalies. Unfortunately, even if ATO enquiries are proven a false alarm, considerable angst as well as time and money will be expended by a business owner or taxpayer to prove it.
Next Steps
According to CPA Australia, justifying (or defending) your actions, will involve a 9-Step Response.
In our experience, even relatively straight forward requests from the ATO can involve hours of work. It’s unavoidable and it can be costly.
Such is the added pressure of ATO audits on Australian businesses, Audit Insurance is now largely considered a business essential rather than just optional.
While it’s not our habit to recommend products per se, each year we do encourage our clients to consider audit insurance, and to this end we’ve sourced what we believe to be a reputable product.
Called Audit Shield, its purpose is to cover what can be significant audit costs, up to predetermined limits, for fees and costs that include external specialists’ advice.
Expenses would usually include fees for services as your accountant responding to requests on your behalf, then if matters were to escalate, it could include other advisers such as tax lawyers, who may be required for respond to more complex ATO audit enquiries.
For more information about ATO compliance activities and Audit Shield, please contact our office for more information on (07) 5438 8088 or email mail@corebusiness.com.au
Core Business Accountants specialise in business advice for growing and mature family-owned and small and medium-sized businesses.
1: https://www.cpaaustralia.com.au/public-practice/inpractice/what-to-do-when-ato-comes-calling
2: https://www.accountancyinsurance.com.au/