How to Survive a Tax Audit

You open the mail and the first word you see is Audit, you suddenly get that sinking feeling in the pit of your stomach. The Tax office has selected you for an audit. Whether or not you are in the wrong, you know it is going to cost you.

The ATO has increased the number of audits undertaken, WILL YOU BE NEXT?

The ATO’s 2012-13 compliance program will focus on a number of compliance issues, including ‘Employer Obligations’. The main industries being targeted are the ‘Construction Industry’, ‘Cafes & Restaurants’, ‘Postal Services Industry’ and the ‘Cleaning Industry’.

The compliance issues investigated under the ATO’s compliance program, relating to Employer Obligations include:

  • Correct treatment of Salary and Wage payments
  • Pay As You Go Withholding Obligations
  • Contractor classifications and payments
  • Superannuation Guarantee Surcharge
  • Employee Fringe Benefits Tax obligations

If you are to be successful in an audit, it is vital that you understand some basic rules. The following will help:

1. Have good records and books to prove your claims  – this seems basic but you would be amazed at how many taxpayers cannot prove their claims. It’s even worse when taxpayers have such poor records that they are missing out on eligible claims.

2. Engage a good professional advisor  – A good professional should provide you much more value than the cost of their services. A proactive Accountant will make suggestions to ensure you have a methodical record keeping system to minimise all material errors and ensure that you are capturing all eligible tax deductions.

3. Consider having audit protection insurance – The cost of an audit can range in the thousands of dollars, and that’s just the basic cases. An insurance premium from a few hundred dollars for a small business can protect your business against such costly obligations.

4. Use your Professional Advisor as the contact point – consulting your professional advisor will give you time to get a clear answer and consider the relevant consequences. You should be able to speak honestly with your advisor. The Tax office encourages taxpayers to come clean about any errors they are aware of at the start of an audit. In fact, in most cases it can result in a reduction of any penalties applicable. A good advisor can make a difference.

With the continuous improvements to the ATO’s data matching systems and tools, the number of taxpayers being investigated is escalating. Rather than relying on the chance of not being targeted for an audit, you should take all preventative measures to ensure that your business meets all compliance requirements. If you’re already under the ATO’s scrutiny, it’s not too late to obtain a second opinion.

If you would like to receive more information or arrange an appointment to discuss your compliance obligations in more detail please contact our office on (03) 9798 6622 or email

Author :

Rebecca Lim

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