ATO Audit

Top 5 Audit Triggers!

ATO audits are something that every taxpayer and every business dreads. While you or your business can be selected at random by the ATO, often your conduct is the trigger for an audit.

What are some common audit triggers?

1. Unpaid Superannuation

Not paying superannuation on time and in full for your employees is a sure-fire way to attract ATO attention and potentially trigger a wider review into your affairs.

2. Inconsistency Between BAS and tax Return

The income declared on your or your business’s year-end tax return should broadly align with the amount of income you have recorded throughout the year on your BASs. large discrepancies invite and often result in ATO scrutiny.

3. Falling Outside the ATO Small Business Benchmarks

If your business falls outside the ATO’s Small Business Benchmarks this will most likely lead to further ATO enquiry, and possibly an audit. In simple terms, the benchmarks are industry-specific financial ratios that the ATO has developed to assist in comparing your business against others in the same industry. If your business falls outside the benchmarks, the ATO will likely make contact and give you the opportunity to explain why. For instance, it may be that you have higher costs or lower selling prices than other similar businesses of the same size within your industry. Whatever the reason, it is important that you communicate it to the ATO if they ask. If the ATO is satisfied with your explanation, this may be the end of the matter…and a review or audit may be averted.

4. Compliance History

If you have outstanding debts or outstanding returns/BAS (or are consistently late in these areas) you are much more likely to be audited than businesses with a good compliance history.

5. Company Car But No FBT

If your business has purchased a motor vehicle but has not lodged an FBT return or at least included in its income tax return an employee contribution so as to minimise the FBT payable on the car benefit, then this will likely lead to further ATO scrutiny. It is rare indeed for a company car to not be used at least in part for private purposes during the year.