In recent years, the ATO (Australian Taxation Office) and other agencies have announced significant progressions in sophisticated, electronic techniques for data matching, leading to an increase in audit activities organized by the ATO. ATO also extended their activity to include businesses that have online payment schemes and Audit Insurance.
What exactly is data matching?
There is a number of systems owned by ATO that provide the precise details offered on your tax return to the data supplied from other sources. The ATO cross-check the information in tax returns against approximately 650 million transactions offered by third parties.
Health funds, financial & banks, superannuation funds, work cover, online selling platforms, etc., are some of the external sources used by ATO for data matching. The ATO is growing its data matching to include areas like:
- Foreign income source
- The income of Government agencies from payments
- Trust and partnership sharing
- Capital profits from the shares and property disposal
- Employee share schemes
The growing use of enhanced analytics and automation has resulted in increased and audit actions for persons, which led to over 500,000 adjustments from reviews and audits during the 18’-19 years of tax.
What can generate an ATO audit?
Numerous factors can augment the risk of or trigger an audit:
Late lodgment history: The ATO monitors all the fulfillment obligations, including BAS, employee-related, and FBT reporting.
Performing external industry benchmarks: Most dissatisfied employees complain that they have been not paid precisely – what may begin as a review of superannuation can easily rise into a full audit to GST, income tax, and fringe benefits tax (FBT).
Big discrepancies in information lodged with an ATO, for say, the difference between your business activity and information reported on an income tax return, PAYG summaries, FBT return, etc.
International transactions: Material transactions over $10,000 with global parties, especially if those parties are affiliated, related entities, or any entity situated within a tax haven, are checked by ATO.
Under the spotlight: The ATO observed social media and media outlets for reports of crucial disputes or transactions.
Being on the ‘hit list’ of ATO: Your business or you might be in an industry that the ATO has chosen to focus on in a specific financial year. In this scenario, Tax Audit Insurance can be helpful.
What is involved in a review or audit?
Audits and reviews involve ATO looking at the requesting supporting and affairs documentation in combination with the amounts reported to them, ensuring that the information you have provided is authentic and met compliance examination. An audit is placed by the ATO when a more detailed investigation is needed.
How long will the audit take?
A review or audit can take no specific time. From a week to many months or even a year, your audit can take any of these times and lead to high cost and disturbance to your business.
So keep you and your business ready with the right Audit Insurance.
Get in touch with experts and go for insurance right now.