As we approach the end of the financial year, many companies will be looking to get their financial affairs in order. Tax time can be a difficult and stressful period for business owners, particularly if they are not clear about their obligations to the ATO.
Fortunately, Calibre Business Advisory’s team of trained tax accountants are here to assist. Having assisted many companies through all aspects of taxation — from completing a tax return to being audited — we are well placed to help you navigate this difficult time.
What is a tax audit?
A tax audit is an official examination of a tax return by the Australian Taxation Office (ATO).
The ATO undertakes an audit or review in situations where they consider a more in-depth examination of a return or issues is required’. This can be for a range of reasons, which will be outlined in greater detail later in this article.
A tax audit can be a quick or comprehensive process, depending on the issue at hand. During the audit, the ATO will request and review various documentation to gain a clear picture of your company’s financial position or a particular transaction or event. This is why tax accountants recommend that you keep thorough records in support of financial transactions and cash flow payments. Doing so is the best way to prepare yourself for the possibility of an ATO audit.
Depending on the findings of the audit, the ATO may issue you an amended assessment of your tax liability, together with interest and penalties. The financial penalties can be quite severe in nature, being up to 100% of the adjustment of your tax liability. On the other hand, they may indicate that no adjustments are required.
Why am I facing a tax audit?
Many business owners panic at any mention of the word ‘audit’. This reaction is justifiable; however, it’s important to keep in mind that there are many reasons why the ATO may request a more in-depth look at your financial statements.
Some of these reasons include:
- Failure to lodge your tax returns on time
- Discrepancies between tax returns and business activity statements
- Fluctuating income, expenses and profits
- Large transactions or events, such as the disposal or acquisition of shares or businesses
- Negative media attention.
It’s important to remember that an audit does not necessarily mean that you will be penalised. By ensuring that you have all your documentation in order and can prove the legitimacy of your tax return and financial transactions, you should emerge from an audit in a positive position.
How to respond to an audit
Audits are best responded to with a calm attitude and thorough preparation. Companies that have kept clear financial records and can track and trace every payment that has been made through their system should have no problems responding to ATO requests.
However, not all businesses are in this position, which is why many can benefit from the assistance and expert advice of a trained tax accountant.
Calibre Business Advisory has a long history assisting businesses of all shapes and sizes respond to ATO audits. We have an excellent relationship with the ATO and are well respected for the manner in which we respond to audits on behalf of our clients.
While the conclusion of an audit may result in your company being issued an amended assessment and penalties, Calibre Business Advisory’s team of tax accountants can assist you handle this situation while also making positive plans for the future.
With tax time fast approaching, it’s a good idea to get all of your financial documentation organised, should you be issued with an audit from the ATO. Contact Calibre Business Advisory today to speak to one of our qualified tax accountants and learn how we can assist you.