Navigating ATO Audits: What You Need to Know and How We Can Help

Building upon our previous newsletter on ATO Data Matching programs, this month, we wanted to provide you with more insights into these initiatives and their potential impact on your tax affairs. These programs are pivotal in upholding the integrity of the tax system, and we want to ensure you fully comprehend their implications.

It’s important to note that if the ATO checks your information through data matching, it doesn’t automatically imply suspicion or dishonesty in your tax matters. Instead, the ATO’s typical practice is to reach out to understand the situation better, ensuring accuracy and fairness in their assessments.

In this article, we'll explore the ATO's audit processes, what you need to understand if you ever find yourself in their crosshairs, and how our Audit Shield service can provide you with peace of mind.

Risk Review and Audit Processes

The ATO's primary goal is to ensure compliance with tax laws while maintaining fairness in the tax system. When they detect a potential compliance risk, the first step is often a risk review. During this phase, they assess whether there are any compliance issues that require a more detailed investigation.

Outcomes of Risk Reviews

After a risk review, the ATO will discuss the outcomes with you. They'll either be satisfied with your compliance or recommend further action. If significant risks are identified, an audit may be the next step.

Audits: A Deeper Dive

Audits are more comprehensive than risk reviews and involve intensive examination when there's a risk of substantial underpayment of income tax, GST, or excise. They aim to:

1. Verify the correctness of taxes paid.
2. Understand the causes of non-compliance and rectify them.
3. Identify areas where tax laws or ATO processes need improvement.

Typically, an audit follows a risk review to test the review's conclusions. It may involve narrowing or broadening the scope based on findings during the audit.

How Likely Am I to Be Selected for Audit Activity?

Data matching becomes more sophisticated each year, making it simpler and far more likely for previously untargeted taxpayers to encounter audit activity, despite their adherence to tax regulations. The ATO, along with other relevant government revenue authorities, has unprecedented access to taxpayer records, allowing them to specifically target previously unreviewed tax returns. Now, more than ever, you could be at risk of audit activity.

Preparing for an Audit

If we receive ATO notification that you are subject to review, as a precaution, we will review our records. We will then let you know if there are any extra documents we would like you to track down and send to us to aid this review.

We will then be in touch with a list of anything additional we need from you to complete our files.

The cost to have us correspond with the ATO about the audit will vary depending on how much information they request but would generally fall somewhere between $250-$3,000+GST and is tax-deductible.

If you would not like us to liaise with the ATO on your behalf, we will seek your confirmation to proceed. If you have participated in our Audit Shield service, this will cover our costs to assist in the audit process.

In conclusion, understanding the ATO's audit processes and being prepared can help you navigate these situations with confidence. Our Audit Shield service offers an added layer of protection, ensuring that you have the support you need during an audit.

Stay informed and compliant to keep your tax affairs in order.