Can you afford an audit? A Melbourne tax accountant explains the audit process
You’ve got a lot going on at the moment.
Perhaps it’s a busy sales season, or you’ve just landed yourself a big client. It could even be something going on with your private life, such as planning for an upcoming holiday or a major purchase.
And then you receive a letter.
You open it, noticing the distinctive ATO letterhead and your heart sinks. You skim through it and your heart drops even further: you’re about to be audited!
Our accountants in Beaumaris explain: what is an ATO audit?
If you’ve never been subject to an audit before (which is most of us), you’d be forgiven for not really understanding what an audit entails.
Simply put, an audit is when the ATO singles out your personal or business taxes for closer scrutiny.
What triggers an ATO audit?
They can be triggered if the ATO notices that the numbers don’t add up:
- Failure to declare income
- Improperly claiming deductions
- Your lifestyle not matching your nominal income
Alternatively, it could be in response to a voluntary disclosure.
Generally speaking, it usually entails a close look at your affairs to ensure the information you’re reporting to the ATO is accurate and compliant with your obligations.
During an audit, the ATO may also get in contact with third-parties such as employers, banks and suppliers to verify information.
While it certainly sounds scary, our tax agents in Beaumaris want to stress that ATO audits aren’t an inherently bad thing!
Ultimately, the purpose is to ensure that everyone is paying their fair share of tax – if it turns out that you’ve over reported your tax obligations, an ATO audit may actually leave you with more money in your pocket!
What happens during an audit
ATO audits typically come in two phases:
- Risk review
- Audit
A risk review determines whether there are any compliance issues with your taxes.
Typically, this doesn’t go very deep – the ATO understands that most cases are honest mistakes, and will help you correct them.
But say that your review comes up with certain errors, issues or discrepancies, that triggers a full audit.
Audits are a more comprehensive investigation, intended to unveil underpayments, and non-compliance.
However, like we mentioned above, audits can also be triggered when the ATO identifies cases where you’re paying too much tax – it isn’t all about tax evasion!
What the ATO needs from you
What makes audits so stressful for most of our clients isn’t the fact that they’re being audited – the vast majority are completely above board.
Rather, it’s the time investment that puts them on edge.
The ATO prefers working with the subjects of audits. You may have to sit through multiple phone calls, meet an ATO agent in-person or spend hours rifling through past receipts, records and documents.
On top of that, the ATO may request unfettered access to your property and records – no wonder audits are such a huge cause of stress!
Audit insurance
Let’s face it, you’ve got a lot going on in your life.
Combine that with the frankly confusing tax code, and it’s easy to see why you might want to leave it to the professionals, including:
- Tax accountants
- Lawyers
- Bookkeepers
- Actuaries
- Valuers
So where does audit insurance come in?
Just like any other form of insurance, audit insurance is to offer financial protection in the event that you are selected for an audit.
In exchange for a monthly fee, you may receive a payout in the event of an audit, covering the expense of seeking professional assistance.
While obviously we can’t tell you to buy audit insurance (only you can do that), there are a couple of reasons you may like to consider it:
- If your industry or profession is more frequently targeted for audit
- If your tax obligations are complex, and will require multiple professionals
- If you crave peace-of-mind
As with any other type of insurance, it’s crucial that you carefully read the terms and fully understand what you’re signing up for.
How our small business accountants in Bayside can help you avoid audits
The best way to protect yourself from being targeted for an audit? Getting your tax obligations in order from the get-go.
That’s why it’s so important that you get support with your business tax in Beaumaris, bayside, or Melbourne with a qualified and experienced tax accountant.
A tax professional like Bruce Edmunds & Associates ensures that your tax obligations are in order, allowing you to go about your business without the threat of an audit looming over your shoulders.
Our team look after:
And in the event that you are subjected to an audit, our team of experienced accountants can represent you to the ATO and work through your audit.
Whether you need support for your personal finances or need help with your business tax return in Melbourne, give Bruce Edmunds & Associates a call today on (03) 9589 5488, or click here to arrange a friendly chat about your tax obligations.
