The process of a tax audit is usually initiated by the ATO (Australian Taxation Office) who will send a notice to the taxpayer advising them that they are going to be audited.
The taxpayer then has 21 days to provide the ATO with all the relevant documentation and information that they require.
Once the ATO has received Accountants Adelaide all the documentation, they will assess it and if they believe there are any discrepancies, they will raise an objection.
The taxpayer then has 28 days to respond to the objection. If the taxpayer does not respond or does not agree with the ATO’s objection, the matter will be escalated to the AAT (Administrative Appeals Tribunal).
The AAT will then hear the matter and make a decision. If the AAT decides in favour of the taxpayer, the matter will be finalised.
However, if the AAT decides in favour of the ATO, the taxpayer will be required to pay any outstanding tax plus interest and penalties.
Types Of Tax Audits
The ATO conducts two types of audits – a compliance audit and a special project audit.
A compliance audit is conducted to ensure that a taxpayer has complied with their tax obligations, and a special project audit is conducted to gather information about a particular issue or area.
A compliance audit is the most common type of audit conducted by the ATO.
Compliance audits can be conducted for any type of tax, including income tax, GST, fuel tax, and luxury car tax.
A compliance audit may be triggered by something specific, such as a high level of deductions claimed, or it may be conducted on a random basis.
A special project audit is conducted when the ATO has concerns about a particular issue or area.
Special project audits can be conducted for any type of tax, and they are often conducted in addition to a compliance audit.
Special project audits may be triggered by something specific, such as a high level of deductions claimed, or they may be conducted on a random basis.
Reasons For A Tax Audit
There are many reasons why the ATO may choose to audit your tax return, but there are three main reasons that are most commonly cited. Here are the three main reasons for a tax audit, according to the ATO:
1. You’ve Made A Mistake On Your Return
One of the most common reasons for a tax audit is simply because you’ve made a mistake on your return.
This could be something as simple as an incorrect figure or an oversight when it comes to claiming deductions.
If the ATO believes that you’ve made a mistake on your return, they will send you a notice to explain the error and give you a chance to amend your return.
If you don’t agree with the ATO’s assessment of your mistake, you can dispute it.
2. Your Return Is Incomplete
Another common reason for a tax audit is if your return is incomplete.
This could be because you’ve forgotten to include some important information, or it could be because the ATO believes you’ve deliberately left something out.
If your return is incomplete, the ATO will send you a notice to explain what information is missing and give you a chance to provide it.
If you don’t agree with the ATO’s assessment of your return, you can dispute it.
3. The ATO Has Selected You For A Random Audit
The ATO also conducts random audits, which means that they will select a certain number of taxpayers at random to audit.
This is done to help the ATO ensure that everyone is paying the right amount of tax.
If you’re selected for a random audit, the ATO will send you a notice to explain why you’ve been selected and what they’ll be looking for.
If you don’t agree with the ATO’s assessment of your return, you can dispute it.
If you’re selected for a tax audit, it’s important to remember that you have rights and you can dispute the ATO’s assessment if you don’t agree with it.
How To Prepare For A Tax Audit
The ATO conducts audits to ensure that taxpayers are correctly meeting their tax obligations.
If you are selected for an audit, it is important to be prepared in order to avoid any penalties. Here are four tips on how to prepare for a tax audit:
1. Keep Good Records
One of the most important things you can do to prepare for a tax audit is to keep good records.
This includes keeping receipts, invoices, bank statements, and other documentation that can prove your income and expenses.
If the ATO requests these records, you will need to be able to provide them in a timely manner.
2. Be Honest
It is important to be honest when dealing with the ATO. If you try to hide information or mislead them, you may end up facing harsher penalties.
Be upfront about your income, expenses, and any other information they request.
3. Cooperate With The ATO
During an audit, the ATO will likely request a lot of information from you.
It is important to cooperate Nitschke Nancarrow Accountants with their requests and provide the information they need in a timely manner.
If you do not cooperate, the audit may take longer and you may end up owing more money.
4. Seek Professional Help
If you are selected for a tax audit, it is a good idea to seek professional help.
An accountant or tax lawyer can help you navigate the audit process and ensure that you are meeting your obligations. They can also represent you in case of an appeal.