It is a known fact that lodging and filing an accurate tax return is an important task for any business, after all no wants to get ATO’s attention for wrong reasons. While most businesses are aware of this fact, few end up facing ATO scrutiny, and it might be a costly and stressful affair. There are few things that you may be doing wrong which may land you in trouble with ATO, so we have prepared a comprehensive list for you so that you are not in a tight spot with ATO-
- Declaration of income: Failing to declare accurate income is a common blunder one can make. You might commit this act consciously or deliberately, but we suggest you should never commit such mistake and pay close attention to the facts and figure you declare for your income.
- Inaccurate tax deductions: Are you unaware of what deduction you can claim? Or whether a particular deduction is applicable for your business? While it is okay to miss out on claiming tax deductions which you are eligible for, it is definitely not right to claim for an inaccurate tax deduction. We advise you to take full benefit of the government schemes and grants while making sure you don’t face contravention. In such a case, having an online accounting services provider for your business is a lifesaver as they will guide you through the tax deduction process and help you with accurate deductions.
- Lack of documentation: When we say documents, we mean all the receipts that could help you claim the tax deduction. Your claims on expenses without receipts are limited to only A$300. Recording-keeping and maintaining all invoices and important document is a tedious task but something which is critical.
- Gap of income and lifestyle: It is hard to believe when an individual has a lifestyle way above their income, and such individuals are always on ATO’s radar. You cannot be enjoying a luxurious lifestyle while your overall business in under losses, it is basic sense and you might find that you are under ATO’s spotlight in no time.
- Having a Cash-Only Business: While this is not something illegal, however, it might attract ATO’s attention as it is assumed as a way to evade taxes by most business owners.
You might be thinking of how ATO will be able to keep track of all your activity. The answer is simple, “big data”. The ATO is able to access all important information that has any kinds of financial implication like assets, yearly income, financial transactions, etc. That is not all, and it also might go through your social media profiles that will help them to assess your financial standing.
Another way of conducting scrutiny by ATO is setting benchmarks for different industry and comparing a business income to this benchmark. This may or may not be accurate, but it does help ATO get a better understanding of your businesses financial position and whether it is acceptable as per the industry standards. If your declared income is way below the industry benchmark, it automatically raises a suspicion.
Going through the ATO audit trail is not worth the time and stress it involves, so it is better to stir clear from committing any mistake that might put you on ATO’s radar. The list of things we discussed before that might lead to ATO’s scrutiny should be avoided at all cost, as we stated earlier, you might be making these mistakes consciously or subconsciously.
All these issues can be resolved with one simple strategic decision – hiring a reliable bookkeeper and accountant. Many business owners are quite stubborn, and a few don’t possess delegation skills and thus do not hire bookkeepers or accountants because of which they end up suffering more. It is important to let professionals take care of your bookkeeping and accounting process so that you do not mess up your taxation. A well keep records and rightly calculated accounts will always serve as a right base for calculation of tax. Additionally, an accountant will also provide you with strategic assistance that will help you in making major decisions that affect your business financial health.
Hiring in-house, local, or accounting firms online is a choice that you make based on your need and other factors, but having professional take care of your books of account will improve your taxation process. Not only it will be efficient, but it will also help save you from a significant amount of stress related to taxation.