Tax Office is focusing on GST compliance and businesses could expect a surge in audits.

The ATO’s audit selection criteria are designed to identify potential areas of concern and pinpoint businesses or individuals that may require closer scrutiny. Here’s a detailed elaboration on some points:

Business Turnover:

Businesses with unusually high or low turnovers might raise red flags. Unusually high turnovers could indicate aggressive business growth, while unusually low turnovers might suggest underreporting of income.

Deviations from past GST lodgements:

Significant deviations from previous GST lodgements, especially sudden spikes or drops in reported sales or purchases, can trigger an audit. Inconsistencies from historical data might indicate potential issues.

Compliance History:

Businesses or individuals with a history of non-compliance, including previous tax penalties or irregularities, are more likely to be targeted for audits. Compliance history is a crucial factor in the ATO’s audit selection criteria.

Late Lodgements:

Ongoing late lodgement of BASs can attract attention. Consistent delays in lodgements might suggest disorganization or intentional evasion.

Cash-Heavy Industries:

Industries that primarily deal in cash transactions, such as hospitality or small retail businesses, may be at higher risk. Cash-heavy businesses provide opportunities for underreporting income.

Property Transactions:

Individuals or businesses involved in property transactions, especially those with complex ownership structures, might be targeted for audit. Property dealings often involve large sums of money and can be susceptible to fraudulent activities.

Inconsistencies between Income Tax and GST Records:

Discrepancies between income tax records and GST lodgements can raise suspicion. Inconsistencies might include differences in reported income, expenses, or deductions, indicating potential attempts to manipulate the tax system.

Frequency of GST Refunds:

Ongoing GST refund claims without corresponding patterns in business operations can be a cause for concern. Multiple refund requests within a short period may be flagged for investigation, as they could indicate fraudulent refund attempts.

By considering these specific criteria, the ATO aims to identify patterns and behaviors that indicate potential tax evasion or fraud. Businesses and individuals are encouraged to maintain accurate records, lodge their BAS s and Income Tax Returns on time, and ensure consistency between different financial documents to avoid attracting unwanted attention from the tax office..

 

Reducing GST audit risk in Australia involves careful financial management and compliance with taxation laws. Here are four essential points to minimize the risk of a GST audit:

1. Maintain Accurate Records:

Keeping detailed and accurate financial records is crucial. Ensure that all transactions, including sales, purchases, expenses, and GST-related information are well-documented and organised. Proper record-keeping not only helps in lodging BASs accurately but also provides evidence of compliance in case of an audit.

2. Regularly Reconcile Income Tax and GST Records:

Reconciling income tax records with BASs lodgements on a regular basis helps identify and rectify inconsistencies before they become major issues. Businesses should ensure that the information reported for income tax purposes aligns with the information provided on the BASs, reducing the likelihood of discrepancies that might trigger an audit.

3. Understand and Comply with GST Regulations:

Stay informed about the latest GST regulations and compliance requirements. Businesses should be aware of their GST obligations, including thresholds, exemptions, and input tax credits. Training employees responsible for financial matters and seeking professional advice if needed can help in ensuring accurate compliance, minimizing the risk of errors that could lead to an audit.

4. Engage Professional Assistance:

Consider hiring experienced accountants or tax professionals who specialise in GST compliance. These professionals are well-versed in tax laws and can provide valuable guidance on proper record-keeping, accurate filings, and compliance with GST regulations. Their expertise can significantly reduce the chances of errors that might attract audit scrutiny.

 

By adhering to these practices, businesses can substantially mitigate the risk of a GST audit in Australia. Being proactive, maintaining accurate records, understanding regulations, and seeking professional assistance when necessary are key strategies to ensure compliance and minimize the likelihood of facing an audit from the tax authorities.

We are here to help and assist. Please contact our experienced team at info@boutiqueaccounts.com or Kunal Shah on 0422179150. We can provide you assistance or consulting with regards to GST, general business health check as well as tax.