Facing an investigation or audit from the ATO can be a stressful ordeal for most individuals, yet it is an essential part of our taxation framework.
Should you be selected for review or audited, here are some tips and recommendations that can help you achieve the best possible outcome.
Step 1: Reach Out to Your Tax Adviser
If the ATO has reached out to arrange an audit, we highly recommend contacting your tax adviser as soon as possible. The absolute worst thing you can do is to ignore the ATO contact; the ATO is not going to just go away or forget about what they are asking for. Ignoring their communication will only ever lead to further investigation and, potentially, penalties or incorrect assumptions being made. You want to have the opportunity to share your side of the story and avoid any misunderstandings.
The second worst thing you can do is try to respond to the ATO yourself. The tax system is complex, and you need to make sure any response is provided with particular attention to technical points and in full. It can also be a stressful process which can lead to emotionally-driven responses, which will not be helpful with the ATO. The correspondence is best handled by your advisers for these reasons.
Step 2: Timing is Everything
This is one thing you don’t want to put off — get in early and take the time and effort to respond in full. If you have given your adviser the notification immediately, they will have time to prepare a proper response. You do not want them scrambling and rushing with a half-baked response just to meet the deadline. You want to ensure the initial response is complete, addresses all issues head-on and shows your compliance with the issue being investigated.
It’s understandable that you might want the situation to be over and done with as quickly as possible, but trying to speed up the process in order to reduce fees or save time could do more harm than good. If the ATO isn’t satisfied with your initial response, they might expand the scope of their investigation, taking up even more of your time and money.
In cases involving intricate or risky financial matters, because these responses to the ATO can be quite involved, it could be worthwhile considering audit insurance to cover the fees of any ATO review activity.
Step 3: Honesty is the Best Policy
Don’t be tempted to lie or be untruthful in your ATO responses or with the information you provide to your adviser. If there have been errors made, voluntarily disclosing these as early as possible and owning up to any mistakes will help to limit any potential penalties and interest charges.
Our tax system is complex and there are mistakes made every day. If you have unfortunately made one, it is likely not the end of the world and can be managed by dealing with the ATO honestly and as early as possible.
Step 4: Learn and Improve
Consider this a learning opportunity! What can you take away from the process to make sure any future ATO investigations are less stressful and more easily managed?
While we all hope to not receive ATO scrutiny, it is inevitable that many of us will likely go through the experience as a regular part of our activities or as a once-off throughout our time in business. The key takeaways are to:
- Involve your advisers immediately,
- Commit to putting a complete response in as your first response, and
- Be truthful in all dealings with the ATO
We’re Here to Help!
If you do need support with any ATO audits or investigations, we’re here to help! The team at Hoffman Kelly are experts when it comes to audits and will work alongside you to help ensure the best possible outcome for you and your business. Submit an enquiry online, or call us today on 07 3394 2311.