Being selected for an ATO audit or review is not ideal. In fact, it can be stressful, time consuming and disruptive to your business and life. But, it’s not always a sign you’re in trouble - the ATO conducts tax audits as part of regular compliance activities to ensure fairness and integrity in the tax system.
If you or your company are the subject of an ATO audit, understanding the process and how to manage it will make things less disruptive and reduce your risk of incurring ATO audit penalties. If you’re wondering what triggers an ATO audit or what happens when the ATO audits you, check out our ATO Audit FAQs . And if you’ve already received an ATO audit letter, be prepared with our top tips on how to manage it.
Review Your Records
It’s important to review your records to make sure they’re accurate and complete, regardless of whether you have been contacted by the ATO about an audit or a review. This includes reviewing financial statements, invoices, receipts, legal documents and anything else that might be relevant. This will help you identify any areas of concern and give you the opportunity to correct any errors or omissions before a review or audit is announced.
If you are selected for an ATO review, the process tends to be a more cooperative approach and you will generally be provided with the opportunity to make a voluntary disclosure of any errors or omissions. Most ATO audits are escalated from a review. However, if you provide evidence of compliance during an ATO review, you might be able to avoid a tax audit taking place.
Gather Supporting Documentation
To best prepare for an ATO audit, gather relevant supporting documentation to support the information contained in your records. This may include bank statements, contracts, and other evidence of transactions. Having all of this information readily available will make the audit or review process much smoother, and will also send the right signals to the ATO.
Be Cooperative With the ATO
When you meet or correspond with the ATO auditors, being cooperative and honest is always the best approach. If the ATO can’t get the information they need in a cooperative way (i.e. if you’re not forthcoming with relevant information), it will rely on its formal information gathering powers.
Keep Good Records
After an ATO audit or review has wrapped up, it’s important to keep good records of the information you provided. This will help you respond to any future questions or concerns that the tax office may have.
Seek Professional Advice from a Tax Consultant
As soon as you receive an ATO audit letter, connect with a tax consultant . An experienced tax consultant will ensure you understand what the ATO audit penalties may be and what they’re likely to ask for, then assist you in preparing for the tax audit or review. A tax consultant can also help if you have any concerns about the accuracy of your records.
At BlueRock, our Complex Tax Advisory team incorporates tax consultants and tax lawyers with specialist expertise in helping small business owners, family groups and high net worth individuals in their dealings with the ATO. Get in touch with us today to discuss your tax affairs.
