The ATO
The ATO conduct of an audit
The Tax Office is required to conduct audits in an impartial and fair and treat all taxpayers in accordance with the law and the principles of the Taxpayers'.
Taxpayer's obligations
The Tax Office expects taxpayers to provide complete and accurate responses to requests for information and to be both truthful and honest in their dealings with the Tax.
Completion of audit
Either during the process of the Audit, depending on the size and quantum of issues at hand, or at the completion of the Audit, the Tax Office will set out the the basis of any adjustments made as a result of the audit and inform the taxpayer of any error that has been detected. In business Audits they may issue a position paper to which the Taxpayer may respond prior to the ATO making its final determinations in writing.
There is no benchmark for how long an audit should last however the Taxpayer’s Charter requires the Tax office to advise in advance the expectation processes of the Audit.
Common target areas
The below is a non exhaustive list. It identifies some of the more of the more likely issues that are scrutinized during an Audit. In some cases they can also trigger a taxpayer to being being the subject of a tax audit:
. income matching
Trust distributions
Partnership distributions
Dividend payments
Salaries and wages
Tax InvociesInvoices (cash economy)
. trading stock valuation methods and inventory recording;
. correct application of tax law between repairs and capital improvements;
. the timing of income and deductions;
. capital allowances and issues relating to effective life, depreciating assets and the disposal of depreciating assets;
. salaries to associated persons;
. work-related expenses (i.e. deductions and substantiation rules);
. employers PAYG withholding FBT, superannuation guarantee and choice of superannuation fund obligations;
. contractors - PAYG, SGC and FBT obligations;
. alienation of personal services income rules;
. bad debts, legal expenses & travel and entertainment expense claims;
. rental properties - deductions, building write-offs and related party dealings;
. non-commercial activities;
. Business issues such as CGT issues, imputation issues, company losses & trust losses ;
. artificial tax schemes
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