Surviving a visit from the taxman

“I’m from the Tax Office and I’m here to help you.”

Fateful words, and ones that you probably don’t believe.

Nobody wants to have a tax audit but if you are in business for long enough it is highly likely that one will occur. And the Australian Taxation Office has recently changed its audit approach.

Knowing what to expect and how to best manage an audit gives you a much higher probability of getting the right outcome.

Over recent years, the ATO has looked to maximise its audit coverage by doing a range of phone and desk-based audits.

This has been supported by wide-ranging campaigns typically signalled by a letter arriving in the mail with a specific area being targeted.

Common to all of these approaches was that there was minimal face-to-face contact unless the audit elevated.

But much of that has changed. The ATO has now moved back to a program of visiting the taxpayer.

If you receive a call and the ATO wants to come out to your place of business, this is simply a reflection of their new approach.

Why the new approach? There are probably a number of reasons. These include:

• Putting a face to the ATO.

• Developing practical experience for their audit staff and giving them exposure to business in real life setting.

• Arguably where the parties meet face to face you can complete enquiries faster and more efficiently.

• Being in the business may allow the ATO to detect other issues or form a view around the compliance level of the business

Whilst the majority of audits are targeted to a specific area, where something arises in the audit or is detected during the visit then the ATO will expand the audit.

So managing an audit becomes even more important. The way you manage the process will often determine both the outcome and how painful the process will be.

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