Taxation Audit Protection
Are You at Risk of an ATO Audit?
The Australian Taxation Office (ATO) is able to gain information about businesses and individuals from a number of different sources:
The ATO is becoming more sophisticated with their data collection facilities and is compiling industry and business benchmarks much quicker than ever before enabling them to compile risk profiles of businesses on a much timelier basis.
In assessing compliance risks across businesses and individuals certain transactions and events may give rise to a high-risk profile including:
- significant acquisitions or disposals;
- interests in different tax jurisdictions;
- substantial related party dealings;
- use of complex business structures;
- any activity that may give rise to special attention – such as a request for an amended assessment or involvement in mass marketed tax arrangements; and
- previous compliance problems.
Having poor compliance systems or ineffective risk management processes in place would increase the likelihood of the business being in the high-risk profile category.
Taxpayers have the burden of proof in determining whether the position they have taken on a particular transaction is correct or not so they need to focus on what evidence they have to back up their view.
It would be dangerous to take a “wait and see” attitude to ATO audits as significant penalties may be incurred for non-compliance. If you believe that you or your business has potential tax audit concerns it is important not to dismiss the issue. Obtaining an independent assessment of any problems is recommended to reduce the risk of any extra tax liabilities.
One way of dealing with the risk is to carry out a prudential tax audit by finding tax problems before the tax office does. Another way of reducing risk is to apply for a private ruling. While some businesses may be concerned about disclosing too much information to the ATO a private ruling does offer some certainty as to the tax treatment and may reduce the risk of an audit by having a history of disclosure of relevant information to the ATO.
Audit protection is a way of minimising the cost of an ATO audit. Makari & Co can help with this cover, please contact us for assistance.
