As a small business owner, you may not like the idea of "fitting in." You want your organisation to stand apart and have a USP so you can attract customers and make as much revenue as possible. Yet sometimes there are good reasons for blending in, and this is especially the case when it comes to tax time. What are the pitfalls of standing out from other companies in your niche?
Algorithms at Work
As you undoubtedly know, the Australian Tax Office seeks to maximise its revenue and wants to ensure that they extract as much money from your organisation as legally possible. To this end, they have a very sophisticated computer system and software that relies on trick algorithms. These tools allow them to compare companies that operate in a similar sector, and they will look at deductions and other declarations very carefully. If they find that your company is claiming a great deal more in one area that is the accepted norm, this could trigger a digital "red flag," and maybe an investigation.
Activating the Trigger
During the course of any given day, the tax authority may get many of these red flags, and they won't act on all of them. However, they certainly will look at some of them, and your business may be unfortunate enough to get a tax audit.
A tax audit by itself is not necessarily something to be scared of, so long as you have everything in order. They will, unfortunately, take quite a bit of time to conclude, and you will need to present information to the inspector on demand.
What to Do Next
If you have been selected for a tax audit, talk to your tax accountant first before you do anything else. They'll be able to explain the process carefully to you and will want to know what is contained within the letter. If you are in agreement, they may nominate themselves as the contact point and from that time on, you should defer to your adviser.
During the audit itself do not engage in any small talk or offer any information unless you get a direct request. Provide the data, records and any backup material as expeditiously as possible.
Some people decide to take out tax audit insurance to help cover some of the direct cost associated. Above all, make sure that you always keep good records and that you have proof to back up any deduction that you make and you should come out of any audit with no issue.
Get in touch with a tax accountant if you've been selected for an audit.Share
9 September 2020
Good day. I’m Linda and I run two family businesses — building contractor and aged care staff agency. It is quite a feat to juggle schedules and keep track of finances. I have become quite an expert with business management software. I have also learnt the vital importance of having good accountants to give advice and keep bookwork up-to-date. Prior to starting our family businesses, I honestly thought accountants existed to organise tax returns. I now understand that their jobs are much more complex and they can help your business prosper. I started this blog to highlight the numerous ways I’ve found that accountants can contribute to financial success. Please browse through the posts and I hope you find something useful within.