The Audit: Tax Time’s Scary Side

Taxation plays a part in any business’ most complicated issues. An even more stressful and time consuming matter regarding the management of any small business’ tax is the audit investigation or tax investigation initiated by the Australian Tax Office.

The Australian Tax Office (ATO) does regular reviews of the small business returns as well as activity statements in order to make sure that these are in accordance with those from their industry benchmarks. An audit usually starts with getting a phone call from an ATO representative which can possibly lead to a full audit of a business’ financial records.

What takes place during an audit?

When an audit happens, a business owner is required to grant full as well as open access to their business’ records, documents, systems and also premises. This is regardless if their accounts are in order and correct or not. During this time, the ATO checks to ensure all the details reported in the tax return and the activity statements are accurate.

The ATO will also check the assets that are owned as well as the business owner’s lifestyle. If a business owner’s expenditure far surpasses his or her income declared, this will make ATO investigate further.

How long does an audit take?

This depends on a business’ size. The audit process can take a few days to many months.

What are needed to ensure a business is prepared when a tax investigation arises?

These are multiple ways to reduce the inconvenience and stress of an audit. These involve:

  • Making sure that there are full records for the expenses that a business owner plans to claim the tax return for. It is best to keep these records for a period of 5 years. Some records can be kept shorter depending on which type of deductions a business owner is making.
  • Employing a professional and expert tax accountant who will help with completing the tax return as well as activity statements. An accountant can make sure a business owner can only claim the deductions he or she is entitled to while keeping the records accurate.

Ensuring that the business’ tax audit insurance is still up to date. This provides financial support for settling disputes with ATO.

 

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