You’ve got mail! The Australian Taxation Office (ATO) is requesting a tax audit of your business. Since it is your first time undergoing this, you start to think of what you need to prepare for the auditing to ensure that you won’t miss any important detail.
Surviving a tax audit is no easy feat, as even the most seasoned business owners will be tested. Instead of fidgeting, why don’t you take a good read of this blog and learn what you should do to prepare for a tax audit? Here are some steps you can take to make sure that you have a smooth auditing experience.
Always Keep Your Records Accurate and Updated
Having inaccurate data will prompt the auditor to dig further for nonconformities. To ensure that the audit will run smoothly and be completed quickly, keep your records updated and error-free.
One of the ways to organise your records is by using accounting software to store your data. The best accounting program to use should be equipped with the updated tax regulations to comply with them easily. Working alongside your accountant or a tax professional will also keep you in check of the taxes your business should be paying.
Check Your Tax Return Entries Twice Before Submitting
Errors are inevitable. While you are confident that your accountant is competent enough to produce an error-free tax return form, it won’t cost you a penny to double-check the entries. The margin for error gets wider when you enter data manually. You can avoid having erratic entries when you use accounting software.
Organise Your Documents and Keep Files From the Last 5 Years
As a standard practice, auditors only check on the previous year’s tax return. However, they can also audit tax documents covering the last five years, especially if they find enough proof that you are understating your business’ taxable income. If you organise your files regularly, it will be easy for you to take out the necessary documents at any time to back up your claim.
Correct Errors Immediately
When you spot errors in your tax return, being diligent in rectifying them pays off. The ATO has the discretion to reduce your penalties for the tax entry miscues.
Aside from these must-do tasks, you need to know what the ATO looks for, so you are prepared anytime you get a notification from the office that you will get audited. Below are some of the things about your business that the ATO will probe into:
- An accurate declaration of all your income
- Deduction entitlement, credits or tax offsets claimed
- Accurate reporting and withholding of Pay As You Go (PAYG) figures
- Accurate calculation and reporting of other tax-related obligations
As a tip, never think even for a second that the ATO will overlook some discrepancies with your tax documents as the institution uses a system that can reveal irregularities and unusual transactions. Not paying the right amount of tax your business owes is punishable by ATO’s laws, and they can subject you to hefty fines.
Follow the guide mentioned above will give you a worry-free auditing experience and pass it with flying colours. If you’re still not confident, you can also consult with an accounting professional.
Are you facing a business audit anytime soon? SMB Accounting is here to help. Our firm completes income tax returns in a timely manner within our office, whether via personal interview, telephone or email. We also offer a range of accounting services, including business advice, taxation and XERO/MYOB/QuickBooks consulting. Get in touch with us.