What to expect from ATO risk reviews and audits.

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An ATO audit can happen any time to a business for things like JobKeeper, early release of super & other financial issues. Learn about what to expect
Outline

Get ATO review or audit advice from a tax accountant

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  • Accountants can help with ATO reviews or audits.
 
  • An ATO review is the first stage of questioning.
 
  • An ATO audit is a deeper exploration of your financials.
 
  • Managing an ATO audits can be made simple with an accountant.

ATO audits can happen any time to a business in Sydney. In recent years there are even more reasons for the ATO to conduct risk reviews or audits with so many changes to tax laws including things like;

  • JobKeeper.
  • Early release of super
  • COVID-19 cashflow boost payments
  • Instant asset write off provisions
 

Unfortunately there will always be some businesses that try to take advantage of government initiatives and in other cases it will simply be a case of poor financial management or accounting practices. The ATO has increased their efforts to review and audit many businesses in Sydney to ensure they are complying with the relevant tax rulings.

In our experience the ATO will spend more time with businesses that do not use a bookkeeper, tax accountant or CPA to help manage their financial record keeping. When a business owner tries to do their own financial management it can lead to mistakes simply because many of the rulings are complex to understand and implement correctly. That is one of he huge benefits of using an experienced tax accountant, our staff keep on top of any ATO ruling changes, work with hundreds of businesses in the area so they are well versed at handling tax return submissions efficiently, while helping to minimise what you pay.

What areas does the ATO focus on?

Each year the ATO will release a media statement about the specific areas they are focussing on for the upcoming tax time period. This changes each year and it is wise to keep up to date with the trends. Engaging a tax accountant can help with this as they will have expert knowledge in that area, plus understand how it relates to your business.

On the 16th May 2022 they released a statement talking about four key areas they were going to focus on for Tax Time 2022 and these included;

  • Record-keeping
  • Work-related expenses
  • Rental property income and deductions, and
  • Capital gains from crypto assets, property, and shares.

These ATO priority areas are put in place to ensure that there is an appropriate level of scrutiny on correct reporting of deductions and income, so that we continue to have a strong tax system that can support the local community. A business owner can take steps to lodge a tax return the right way, the first time. 

Assistant Commissioner Tim Loh explained that “The ATO is targeting problem areas where we see people making mistakes.”

“It’s important you rethink your claims and ensure you can satisfy the 3 golden rules” Mr Loh said.

  1. You must have spent the money yourself and weren’t reimbursed.
  2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income.
  3. You must have a record to prove it.

What is an ATO risk review?

The ATO will usually conduct a risk review initially so they can determine if there are compliance issues that warrant a full audit process to be conducted on your business. Often the risk review process allows issues to be resolved quickly and simply without the need for a full audit.

If an audit is instigated, there are several stages that include;

  • An initial meeting.
  • Research.
  • Investigation by the ATO agents.
  • Discussions with the business owner
  • ATO issuing a final audit report and outcomes. 

 

Often the ATO will issue an interim report before the final report. This allows a business owner to review their position and make comments or provide further information. Some audits will be concluded within a few months and others may take up to 18 months.

There are several types of audits for small to medium enterprises, including;

  • Record keeping
  • Income tax
  • Data comparison
  • Cash and hidden economy
  • Superannuation guarantee audits.

 

What to expect during an ATO Audit?

If we are engaged as your tax accountant, then the ATO will generally liaise with us in the first instance. This can help set the right impression and make any conversations quicker to resolve. You will be assigned an ATO case officer and from there this is what will happen;

  • We will advise you of the contact made by the ATO.
 
  • An initial interview, at which they will explain why the business was selected for an audit. The ATO representative should give an indication of the period to be audited, the business owner’s obligations, what to expect from the ATO during the process, and an opportunity for voluntary disclosure. They will also provide the means for raising concerns during the audit or for disputing the result of the audit.
 
  • Investigation of business records. Business records are crucial to an ATO audit going smoothly and efficiently. The easier it is to access business records, the quicker the process will be finished. The ATO will require access to all records including bank statements, contracts, agreements, payroll, finance arrangements, asset purchase and disposal, and all accounting records.

 
  • Personal records may also be needed if the ATO suspects significant undeclared cash income.

 
  • For something like JobKeeper and COVID-19 audits, you will need to show calculations of turnover reduction and employee nomination forms.

 

In our experience the ATO has a flexible and cooperative approach to most situations. Therefore we always recommend that business owners assume the best; just as much as you want the audit to be over, they want to resolve the issues. Be calm and professional in your dealings with the case officer as this will help resolve any matters very quickly.

Just remember, you are dealing with people not robots and sometimes it is a simple misunderstanding that needs to be clarified with the right financial information.

What if you don't have a tax accountant but get an ATO Audit?

If you’ve been contacted directly by the ATO about a review or audit but don’t have a relationship with an existing tax accountant, that is perfectly find. You can contact us to get help with the process. If in the first instance it is just at the review stage, we can can help proactively manage your financial records and get your systems or accounts into excellent shape to minimise the impact on your business.

If it has reached the stage of an audit, our tax accounting team can still assist you, just remember that professionally managing the audit process will save you time and money in the long run compared to trying to manage it yourself.

When do you need an accountant or an auditor?

Accountant

An accountant is a very popular service in Sydney where the person typically has an analytical mindset and a desire to work with either a business or personal financial data. The accounting team that we have at Fitzpatrick and Robinson primarily provides in depth financial analysis and accurate reporting for small and medium sized business owners. Our qualified accountants can assist with day to day financial operations, the accuracy of the financial records of a business as well as things like taxes, payroll, BAS or even asset management. 

Accountants will typically have more experience and a wider set of skills compared to a Bookkeeper which gives any business owner access to a wider array of support services including handling tax related matters or the management of an ATO audit request. Rather than just managing daily transactions and balancing the books, an accountant can provide expert tax advice, guidance and suggestions for minimising what a business pays, but also strategic choices if your business is hit with a tax audit in Sydney.

Auditor

An auditor’s role is to specifically analyse the work produced by an accountant to verify that all of the information is correct. This includes examining financial statements prepared by accountants to ensure they represent a business’s financial position accurately. An auditor’s function is to make sure everything is prepared in accordance with local accounting practices. An auditor has to be able to clearly and succinctly explain their findings whether a businesse’s financial statements are all in order or not. 

While the type of person that does accounting or auditing may be similar in terms of aptitude and skill set, there are subtle differences. Accounting requires a person who is more detail-oriented and focused, they will have a broader understanding of business matters and can guide you through the ATO audit process. Auditors also value attention to detail, but they also need strong investigative skills. The auditor will capture honest mistakes, detect subterfuge, fraud, and intentional misstatements by looking deeply into all the details, but they generally don’t have the broader knowledge about managing a business. 

What are the different types of accountants?

There are a few different accountant types in Sydney that you can contract for your business. It is important to differentiate between a bookkeeper and an accountant to make sure you get the right level of service that you need, especially when it comes to handling tax related tasks to manage your business

 

Tax accountant for businesses
A tax accountant for a business will analyse all relevant financial matters to prepare, submit and manage the tax statements and returns for any type of business entity no matter what niche it is in, or if it sells products or services. Our accounting firm in Sydney specialises in helping businesses with four or more employees where help is needed for daily management of the accounts as well as things like payroll, employee contract management or BAS submissions.

Handling your taxes for a business can sometimes get a little complicated especially if you have a medium or large size entity with multiple employees. There might be new laws that are applicable or changes to existing laws that people running a business need to adhere to. That’s why it’s crucial for a business owner to engage with an experienced tax accountant that keeps up to date with the latest news and changes to tax law to ensure you can maximise your deductions, avoid an audit and make smart decisions that can help in other areas like maximising cashflow, tax payment plans etc.

 

Insolvency accountant
A business that goes into insolvency when it can no longer pay its debts, this type of financial difficulty normally requires the help of an insolvency accountant. Very quickly they can identify assets that can be sold, renegotiate existing finances, and explain current legislation where needed. Sometimes, with the help of an insolvency accountant a business may be able to bounce back because of the expert advice they provide. This type of accountant is not only highly skilled in financial matters, but is an exceptional communicator with high emotional intelligence which helps when handling such a difficult process much easier.

 

Forensic accountant
Combining the skills of an accountant and a detective this type of accounting function can uncover what is referred to as ‘white collar crimes’. This normally involves detecting finance related crimes like fraud and embezzlement by discovering financial irregularities. You will find this type of accountant works in public accounting and consulting firms, law firms, law enforcement agencies, and even insurance companies. It requires extremely high levels of detail and written communication as their outputs can be used as evidence in a court of law.

 

Management accountant
In some situations it might make sense to engage a management accountants to analyse the financial position of an organisation and how it could be improved. Their duties and responsibilities involve overseeing accounting staff, budgeting, external financial reporting, risk management, and performing profitability analysis. They won’t get involved in day to day accounting tasks, but will provide a more holistic view that can help make strategic decisions for a business.

 

A certified practising accountant
A certified practising accountant (CPA) delivers a very high level of professional competence with soundness in depth, breadth and quality of accountancy knowledge. CPAs are highly sought after by business owners because it is an internationally recognised qualification that is backed by specialist training as well as continued professional development. 

A CPA can provide advice on both audit and tax issues in Sydney. These professionals are qualified and licensed to provide a range of financial services, including tax planning, compliance, and audit management for a business. Our CPA can assist clients in navigating complex tax regulations, preparing tax returns, and providing audit services to ensure compliance with financial reporting standards. 

A CPA is regarded as one of the most trusted professionals in Australia because of their ability to provide assistance for accounting, taxation, and financial management. They are trained to provide accurate financial advice and ensure that businesses or individuals comply with tax laws and regulations. In Australia, CPAs are regulated by the professional body, CPA Australia, which ensures that they adhere to strict ethical and professional standards which is why they are used to manage tax & audit related situations for business owners.

Accountants that can help deal with the ATO

Fitzpatrick and Robinson can make it very straight forward to deal with any requirements from the ATO if you are a business owner. With a team that is made up of experienced bookkeepers, accountants, business tax accountants and a CPA we can assign the right level of resources to suit your situation. Some of the most common things we get asked by business owners to assist with are;

  • Determining the tax deductibility of certain business expenses
  • Getting help to set up a suitable tax planning strategy
  • Working out how to best manage instant asset write off opportunities
  • Putting in place the right payroll tax processes
  • Getting explanations or advice on ATO correspondence received by the business owner
  • Putting in place payment plans for outstanding tax payments or managing defaults
  • Managing an ATO audit 
  • Getting general tax advise & implementing strategies to minimise what you have to pay

Rick & Bryn
Rick & Bryn

Experienced accountants who love helping other business owners in Sydney to maximise profits, improve cash flow & grow their business.

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At Fitzpatrick and Robinson our purpose and reason for being is to help business owners make more money, pay less tax while growing in a sustainable & methodical way. We have a team of bookkeepers, accountants, tax accountants for business, a CPA, Xero accountant specialists while also providing business advisory services.

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