With funding announced in the federal budget, the ATO will now have further resources to increase their compliance audit activities. Key target areas will be business deductions and employee work related deductions.
To make sure you are not caught out, we recommend the following:
The burden of proof falls upon the taxpayer in the event of an ATO compliance audit. The key to staying out of trouble with the ATO is to keep complete records. When it comes to claiming deductions, without tax receipts or other allowable supporting documentation, it is impossible to determine whether taxpayers have claimed all that they are entitle to. Ultimately, if sufficient records cannot be provided to the ATO when they ask for it, taxpayers are disallowed the deduction, incur interest charges and may incur an additional 75% in penalties if your actions are considered intentional disregard.
The ATO requires taxpayers to retain their tax records for a minimum five-years.
For more information, visit the ATO: https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Keeping-your-tax-records/
Obey the Rules
This may seem redundant, but obeying the rules is the best way to avoid or minimise the risk of an ATO compliance audit. This may include:
- On time lodgement and payments;
- Applying the correct method, calculations and legislations; and
- Being honest and cooperative.
Consider Audit Insurance
On top of the stress involved, even the simplest of compliance audits can be expensive.
Generally, an annual audit insurance policy premium will depend on the size of the entity involved and may feature the following:
- Relief – in the event you are subjected to an audit, enquiry, investigation or review, the associated professional fees (up to a prescribed limit) are covered;
- Retrospective Cover – Previously lodged tax returns are covered automatically;
- Diverse – policy cover may extend to Income & Payroll Tax, GST, Superannuation and more;
- No excess payment; and
- Annual premiums are generally tax deductible upon payment.
To find out more about how you can protect yourself, your family or business from an ATO compliance audit, please contact your Altitude Adviser.