If you've just finished entering some details into your accounting ledger at work, you may be thinking about how much tax you will have to pay to the ATO at the end of the year. Your business is quite complex, and all these numbers can be rather confusing, but, deep down inside, you may be worried about if you are doing it properly so that you can avoid any problems. What is the likelihood of your company being picked for a tax audit and how can you make sure that you sail through such a problem, should it arise?
Unfortunately, it's impossible to determine whether or not your business will be singled out by the tax authority for an audit. This government department does not have a set schedule but does use a complex system of algorithms that can pinpoint any unusual activity and may trigger an audit.
In this case, it's best if your organisation does not stand out from the rest so that it is not seen to be unusual or operating outside of what are considered to be industry norms. Remember, this type of check takes place automatically in the background but if something is thought to be untoward, a message will be sent to a 'human' Inspector.
Accuracy and Timeliness
Having said that, it is equally as important to ensure that your paperwork is completed accurately and that you do so on a regular basis. Otherwise, you may let it slide and forget important details, while you may make some miscalculations or errors to compound the issue.
Always ensure that you are fully entitled to claim for a deduction before you do so and never assume anything. Otherwise, you may get into the habit of claiming for it over and over again and, eventually, find out that you should not have done so.
Keep all your business and tax records safe and hang onto them for at least five years, just in case the ATO does call for an audit during that time. After all, if any of those records are missing or incomplete, then the government will make their own conclusions, and they may levy a tax penalty against you instead.
It is possible to take out a special insurance policy to cover your organisation in the event of a tax audit. However, the insurance company will also require a fair amount of information before they will assume that risk, and you will, therefore, need to have all your records in order in any case.
To help you be prepared, engage the services of an accountant.