ALL BUSINESS – THINGS TO BE WATCHFUL OF
As the Covid19 pandemic sweeps across the globe, the Australian government has provided emergency support to the Australian economy. The underlying cash deficit for 2022 has been forecasted to be $106.6 billion. The Australian tax office is now back in full swing to conduct audits to ensure the correct amount of tax is being paid. Given below are some areas to be watchful.
Covid19 Stimulus related audits
JobKeeper and the Cashflow Boost payments, these stimulus measures were estimated to cost our economy, $130 billion and $31.9 billion respectively. Now that these payments have concluded, the ATO has been given additional resources to commence audits and reviews to ensure recipients meet all the eligibility criteria. Check and make sure your claims satisfy all the requirements.
Being in an ATO target industry
Each year the ATO publishes a list of industries that it is targeting for audits. Some industries are more common targets than others. For example, industries where cash payments are more common and the potential for tax avoidance is higher.
Your business income being low compared to industry benchmarks
The ATO compiles income statistics from the tax returns and business activity statements (BAS) of more than 1.7 million Australian businesses across more than 100 industries. Data matching is easy in the digital age we live in. It allows the ATO to establish income benchmark ranges for businesses in different industries.
The ATO now also has an app for business owners to check their business performance!
If your business income is lower than the benchmark range for your industry, you will have more chance of being targeted for an ATO audit. However, if it is lower, you should have valid reasons why the income has dropped.
In this instance it You may need to focus on improving your business performance instead.
Not declaring all your individual income
Just like you need to declare all your income if you run a business, it is important to declare all individual income you receive. This includes additional passive income such as interest, share dividends, cryptocurrency Airbnb rentals and government benefits, as well as any income you may have earned through short-term contract or the sharing economy as an individual (for example, driving for Uber).
The ATO has a sophisticated data matching system to detect undeclared income. If you are identified via their detection methods, this can trigger an ATO audit.
Declaring all your income includes both domestic and overseas sources. The ATO has data sharing arrangements with more than 40 countries as part of their effects to ensure that all Australians pay the correct amount of tax on their income.
Having a lifestyle that does not match your declared income
If you lead an extravagant lifestyle that does not match your declared income, this can trigger an ATO audit. For example, if you are buying luxury cars or yachts, this can lead to ATO suspicion that you are not declaring all of your income which can then lead to ATO audits. The ATO has done an enormous data matching campaign working with state motor vehicle registries to gather data on company owned vehicles as well as individual’s vehicles.
You submit your tax returns and/or pay your tax obligations late
This can include all your individual or business ATO obligations, including GST (Goods and Services Tax), FBT (Fringe Benefits Tax) and Pay as You Go (PAYG) withholdings on behalf of your employees. Make sure you submit your returns and pay the appropriate tax amounts on time to avoid triggering ATO scrutiny and a potential audit.
If there is a valid reason why you cannot submit any ATO paperwork or payments on time, make sure you (or your accountant) get in touch with them to explain before you miss any deadlines.
Anonymous allegations of tax evasion being made against you
The ATO has a special number that any member of the community can call to report a case of potential tax evasion. If you lead an extravagant lifestyle or if you’re a business that transactions only , you may become an audit target as the result of an ATO tip-off.
Not paying the compulsory superannuation guarantee for your employees
If you run a business and you employ staff, you have a legal obligation to pay 10% of each employee’s salary/wages into superannuation. If you do not do this (or pay late), this can trigger ATO audits on your business.
The instigation of an audit is normally because of employees not receiving their super obligations and reporting it to the ATO. However, with the new STP system we are finding more audits are triggered by the ATO now.
These are some of the areas the Tax office will be concentrating on and if you wish to discuss any area then contact Jacky Chan via the contact us form.