According to ATO data matching is a key component in terms of their surveillance programs. This is why you need to be very careful with your business transactions because the ATO is active with their audit practices and review. There is more to tax compliance than filing an annual income tax return. In fact, ATO uses tax documents to interact with a business that has been selected for audit. There are several ways the ATO audits your business. Here are six ways you can trigger an audit:
1. Incorrect Disclosure
Your business can be flagged for review if you made a mistake in disclosing some items such as your tax return. The ATO has a way of verifying the information they collect from your business and when the information they obtain does not match with the ones you have disclosed, they will call your attention and schedule an audit.
2. Not paying superannuation to your employees
If you have not paid superannuation to your employees, the ATO will find out why you failed to make a payment. The ATO will review your superannuation guarantee obligations and may consider reviewing your income tax, FBT and GST.
3. Poor lodgement record
It is not enough that you lodge your tax return on time as you also have to make sure that you fulfill all your compliance obligations including FBT returns and activity statements. You will also have to ensure that your tax liabilities are paid on time. Having a good compliance history can have a positive impact on your business.
4. International transactions
Another key area that the ATO focuses on is the international transaction which may include transactions with tax havens, funds transferred in and out of Australian and transactions with parties that are international related.
5. Industry financial performance
The ATO statistically analyses tax returns and this is also used for comparing the performance to other industries. A business that is inconsistent with the industry can raise an inquiry from the ATO. This is considered a red flag as this indicates that there are tax issues such as unusual expense claims and unreported income.
6. Consecutive losses
When your business consistently shows a loss, this is an indicator that it has problems. You may have genuine reasons for the loss but the ATO is likely to investigate on the matter.
Monitoring your business transactions on a regular basis can keep audits at bay. A good bookkeeper can help you fulfill your tax obligations and prepare detailed financial report. Audits will become problems of the past if you continuously keep track of your transactions before worsening the problem.