Tax Audits
The ATO will conduct an audit or enquiry on a company into different tax reporting obligations, including Payroll tax, Fringe Benefits Tax, GST and all other matters dealt with the Tax Office.
A tax enquiry or audit is an examination of your tax affairs by the Tax Office to see if you have done what you are required to do under the tax laws.
An enquiry or audit usually involves examining your tax affairs to make sure that the information is accurate and to confirm your taxation liability or entitlement.
The Tax Office may also contact other parties such as banks, employers, customers and suppliers to obtain information.
At the initial interview the tax officer conducting the enquiry or audit will:
- provide Tax Office identification and a telephone contact number when first meeting you (unless this has already been done), as will any other tax officers present
- if you ask, tell you the name and telephone number of their manager, except in very limited circumstances, and
- give you the opportunity to volunteer information about any possible irregularity or omission in relation to your tax affairs. If you do this, the penalty that may otherwise have been imposed may be reduced.
The ATO will:
- seek to arrange any interviews or meetings at times and places that are mutually convenient, usually during normal business hours
- explain the purpose of any interview or visit
- ask clear and unambiguous questions and provide you with all reasonable assistance and explanations to clarify their meaning
- allow you to choose someone to act on your behalf or to attend interviews with you. Quinns are available to assist you during these interviews if you so wish.
- inform you in advance when the tax officer will have a legal adviser present to assist them during an interview
- give you reasonable time to collect records, documents and papers for examination and to gather information about any matter that arises, unless we have reason to believe that the existence or integrity of the documents is at risk
- answer any reasonable and relevant questions you ask relating to the enquiry or audit
- allow you to take notes of any conversations or interviews
- if you ask, or where we consider it reasonable to do so, tape record interviews. A copy of the audio tape will be provided to you, free of charge, at the conclusion of the interview
- if you ask, provide you with a signed copy of the tax officer's written record of interview. If the tax officer asks you to sign the record of interview, the tax officer explain the implications of doing this
- respect your right, and give you adequate opportunity to claim, legal professional privilege in relation to certain communications between you and your barrister or solicitor
- in certain circumstances, allow for some advice to remain in confidence between you and your professional accounting adviser.
- provide a written receipt for any records that is collected in person at an interview and return the records as soon as possible or as mutually agreed
- use discretion if and when the auditor makes any enquiries of third parties and do so without any implication of wrongdoing by you
- allow you the opportunity to give your views on any relevant issue, including any proposed adjustments, and
- keep you informed of the progress of the enquiry or audit. How often this happens will vary according to the type of enquiry or audit being conducted.
The auditor will:
- clearly explain the basis of any adjustments made as a result of the enquiry or audit
- inform you if any error has been detected which has resulted in you paying too much tax or receiving less than your entitlement
- clearly explain the reasons for any penalty or interest and how this will be calculated
- give you the opportunity to explain any circumstances which you believe could justify a reduction of any penalty or interest
- provide you with written notification of the outcome of the enquiry or audit.
- inform you of your review rights and the remedies that may be available to you, and
- draw to your attention any matters that will help you to understand and meet your taxation obligations in the future.
Settlement meetings are usually held for more involved or complex audits. If there is a settlement meeting (or the equivalent type of meeting in the case of excise duty collections or excise payments schemes matters):
- the tax officer conducting the audit will be accompanied by at least one other officer except in the most simple matters
- the tax officer will document the terms of any settlement agreement reached and provide you with a copy.
While the audit process can appear to be a daunting experience, there is some relief in knowing that you can have a representative attend these interviews and settlement meetings on your behalf. We can review your financial records and answer ATO enquiries as your representative, minimizing not only the risk of the ATO finding any discrepancies but also your stress.
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When being audited by the ATO you will be expected to:
- provide the auditor with full and free access to buildings, premises, records and documents, other than those documents which may remain in confidence between you and your barrister, solicitor or professional accounting adviser
- allow the auditor to make copies of, or take extracts of, records and documents other than those which may remain in confidence between you and your barrister, solicitor or professional accounting adviser
- provide reasonable facilities and assist the auditor
- provide complete and accurate responses to requests for information, and be truthful and honest in your dealings with the auditor
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If you’ve been notified of an enquiry or audit, you should prepare for it by reviewing your relevant records, tax returns and activity statements.
The Tax Office should be immediately informed of any errors. If you do this, the level of penalty that may otherwise have been imposed may be reduced.
If the Tax Office is notified of any error before they notify you of an audit, the level of penalty that may otherwise have been imposed will be reduced.
The Quinn Group has a division of dedicated and professional accountants that are available to assist you in your preparation for an audit by the ATO. Our experts will focus on reviewing your financial records and as they have had much experience in conducting audits themselves and have detailed knowledge in the area, they can provide relevant advice on what you can expect during your auditing process.
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In most circumstances, you’ll be notified of the intention of the ATO to make enquiries or conduct an audit of your tax affairs. The notification will be in writing, normally be made to your address for service, and may be preceded by a phone call.
This notification will:
- tell you the name and telephone number of the tax officer conducting the enquiry or audit
- explain the expected nature, scope and duration of the enquiry or audit and indicate the information and records that will be required. The ATO seeks to complete the enquiry or audit in the shortest possible time, but the time it takes depends on several factors such as the type of enquiry, the adequacy of your records, the availability of information, the complexity of the matter and the level of your cooperation.
- advise you that you may have a representative present at the start or at any stage of the enquiry or audit. If you need to consult with your representative, you’ll be given reasonable time and opportunity to do so, and
- tell you about your rights and obligations in relation to the enquiry or audit.
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In conducting audits and making enquiries, the ATO may determine that you have underpaid your tax or received more payment than you were entitled to.
Generally, the tax laws provide for penalties to be imposed where the requirements of the law have not been met. Excise payment laws provide for penalties by way of a monetary amount. In both cases there are different rates of penalty based on the type of behaviour or the degree of culpability involved.
The law also provides for prosecution action to be undertaken for a range of taxation related offences. These offences include making a false or misleading statement in a tax return, making a false or misleading statement to a tax officer and keeping incorrect or false records with an intention to deceive or mislead a tax officer.
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