ATO conducts about 2 million taxpayer audits every year. Some of these audits may be triggered things such as large fluctuations in their income or those who deal predominantly in cash.
While it’s at the discretion of ATO to choose who they audit, there are some things you can do to make it less likely that they will require a full audit of your books.
1. Lodge Your Tax Return On Time
It sounds simple, but the earlier you lodge your tax return, the less likely ATO is to select you for an audit. If you’re lodging a return late, or after you have been selected for review, it will raise a red flag and increase the chances of an audit.
In order to stay on top of this, you need to make sure you have a reliable and trusted source of information. ATO website itself is full of useful information that can help you stay updated on the latest lodgement dates, and any other information that may be useful.
2. Review & Cross-Check The Deductions
Whether you’re filing for the first time or have done it before, it’s good always a good idea to double and triple-check that your numbers are correct.
Sometimes taxpayers make errors in math; those could end up giving you a headache, so do yourself a favor and look at the figures again.
If the thought of crunching numbers gives you a headache, consider using online tax return software or find a trusted tax agent to help you out.
3. Keep Record Of All Transactions & Receipts
It’s always a good idea to keep a record of all your transactions and receipts, regardless of whether or not you think you will be audited. That way, if an audit does take place, you have all the documentation necessary to support your claims.
Besides, with the right documentation, you’re less likely to make mistakes with your deductions, which could end up saving you from a messy situation.
Things like the date, vendor, costs, and nature of the transaction are all important details you should have with you when it comes to filing your tax return.
4. Be Extra Careful Keeping Records When Taking Cash
If you’re a taxi driver, tradesman or shopkeeper and are working with cash, you should pay extra attention to filing your tax return.
The reason for this is that ATO is more focused on cash-based businesses. We talked about keeping records of all your transactions and receipts earlier, however, this is even more applicable to your business model since you’re working with cash.
5. Enlist The Service Of A Tax Accountant
Are your tax returns complex or you’re just not confident you can do them yourself?
If that is the case, consider enlisting the services of a tax accountant. These guys have been doing tax returns for years and know all the ins and outs of the system.
Not only will they help you lodge your return on time, but they can also offer valuable advice on ways to minimise your chances of being audited.