Do you sit and wonder why the stringent ATO attention on your business? Or perhaps want to make sure they are never on your back? As your business tax accountant we provide you with a few of the most plausible reasons you might become attractive to the ATO compliance team.
- Failing to declare income
Cash only business’s can expect the ATO to take a special interest in their affairs. After all, if the business margins don’t add up the perception will be that you are running on a cash-only basis to avoid paying tax. As your tax accountant we reiterate the importance of ensuring all your sales are being properly recorded through the books to avoid unnecessary red flags.
The ATO uses strategies that use benchmarks across similar business’s and group together financial results. If you fall outside these percentages, they will tend to look at you more closely. This can be a controversial topic as business owners are frustrated that their profit or turnover can indeed be affected by seasonal trade or demographics without them doing anything ‘dodgy’.
In addition to the above strategy, there is still the old school community whistle-blowers that are outing business proprietors to the ATO who are failing to properly record sales. Customers may see cash going into the back pockets of some or frustrated staff with outstanding wages or superannuation contributions.
- Not paying Superannuation by the due date each quarter
STP data is now reported on a pay-by-pay basis to the ATO, so they can now data match when super is paid, rather than relying on employees to report unpaid super.
The ATO is currently data matching STP information to Super Guarantee Information and for anyone that has paid super late (after the 28th of the month following quarter end) to lodge SGC statements.
There are strict penalties for not making Super Guarantee Payments on time to your employees. By law, the due dates cannot be varied and the charge from the ATO cannot be waived. Despite COVID, business owners are still responsible for making payments on time – the ATO has no ability to be lenient with this.
- Not complying with an ATO Payment Plan
If you have negotiated a payment plan with the ATO to pay off outstanding debt, this needs to be honoured.
We have found that if you work together with the ATO it usually results in a good result. Meaning you get more time to find funds to pay off the debt and the ATO eventually will get their money. Everyone is happy. Alternatively, if you arrange a payment plan and fail to hold up your end of the bargain you might want to be ready for them to come knocking. The next time you talk with them you won’t have the flexibility with negotiations of a payment plan.
- Claiming deductions you’re not entitled to
We all know you sometimes need to spend money to make money and if your business is producing ‘assessable’ income, then you will usually be entitled to a tax deduction. Many business’s make the error of claiming items they shouldn’t and inflating their deductions but in essence they are probably missing out on deductions they genuinely could have claimed.
To avoid the attention of the ATO here, is that you need to prove you are actually ‘out of pocket’ and it is a genuine expense has incurred to run your business operations. You need to keep sufficient evidence to substantiate the expense.
- Lifestyle and Income do not match
If you’re zipping around town in a luxury car but only declaring business income of $30,000 on your tax return, the ATO will be looking very closely at you.
The ATO can assess the assets you own ie property, cars, boats and calculate the approximate amount of money you will need to maintain that lifestyle. If you declare an amount that in no way aligns with the lifestyle you are living, alarm bells will start to ring.
Call us for support
If you are concerned at all by any of the above or have further questions around the complexity of tax law and ATO penalties, please give our office a call on 07 5451 1118. We are the tax accounting experts, leave it to us.