No accountant or small business owner wants to answer a call informing them of an upcoming audit. But should the phone ring and the Australian Tax Office be on the other end informing you of an upcoming audit, we hope you will not panic.
In many instances, automated computer programs may have been responsible for selecting your enterprise for an audit. So don't take it personally. Audits are simply an attempt to establish greater certainty about your financial reporting. They're a request for more information and a platform for authorities to ask questions, so as to make sure you and your accounting team are doing things correctly.
Audits happen during a finite period of time; they don't drag on indefinitely. The more you know about what to expect, the less stressful audits may be.
After you are notified by phone, written communication will follow in which your business is notified about the types of information sought and the reason for the audit. Transparency will be part of the process, so do reach out to your WMC Accounting advisor as soon as you're notified of an audit. We're here to help.
Common triggers for audits include:
- Economic performance unlike that of other similar small businesses.
- Little transparency with tax information.
- Aggressive tax planning.
- Tax outcomes often out of sync with the intent of tax law
The ATO will inform you or your accountant about the information it needs, its hypothesis about the situation and timelines for the process, according to its website. Also, the agency is aware that sometimes errors happen — and if honest mistakes have occurred on your end, they can be corrected.
Wondering if your business is likely to be audited soon? If it earns between $1-3 million per year, it's among the top group of businesses audited each year, Accountants Daily reported.
Types of audits
According to the tax audit claim statistics published in Accountants Daily, these are among the three top types of audits pursued by the ATO:
- BAS: In the 2020-21 tax year, audits related to business and activity statements accounted for 17.23% of all Accountancy Insurance claims.
- Employer obligations: These payroll-related inquiries accounted for 14.87% of all claims.
- Payroll tax: A slight decrease in 20-21, inquiries about contractors and employee registrations accounted for 9.82% of claims.
All of these audits will be easier processes if your business is organised in the way it handles bookkeeping and payroll.
If you would like to discuss the impact of an audit, or access Audit Shield cover in the event of an audit, please call WMC Accounting.