ATO Audits: Can They Be Avoided?


A commonly-held view is that the self-employed (in particular sole traders and family partnerships) are more likely to be chosen to be audited by the Australian Tax Office (ATO) as such businesses typically do their own accounting and reporting, instead of going through an accountant.

Additionally, the self-employed are more likely to blend their personal and professional assets and obligations (often out of necessity).

However, this is not the case. The ATO applies the same standards to the self-employed as they do to medium-sized businesses (‘SMBs’) and large businesses.

The ATO has a sophisticated set of benchmarks, algorithms, and data-matching technology (comparing figures against those obtained from, say, Centrelink) that flags ‘unusual’ events or activity


What triggers an ATO Audit?


The ATO selects who is to be audited from ‘unusual’ activity, and in the interest of transparency has provided a list of potential triggers on its website.

Among the triggers are illegal activity – transactions or tax outcomes that are ‘inconsistent with the intent of the tax law’.

However, other more innocuous factors are included, such as large one-off transactions, ‘aggressive tax planning’, and economic performance that is not comparable to similar businesses.

This means that businesses who make sudden changes to their tax planning make sudden purchases, or simply have a good year, might trigger the ATO’s data matching and audit benchmarks, and draw the ATO’s attention.

The ATO’s attention might also be attracted via inaction – i.e. if a business ignores information-gathering requests from the ATO or otherwise acts in a way that doesn’t comply with the expected conduct regarding tax laws.

There may be tax law or Corporations Act conduct breaches that you simply weren’t even aware of.


Can You Avoid an ATO Audit?


Short answer?  Not really.

Once the ATO has decided on a target, the most you can do is ensure that you have everything you need ready, such as receipts and other documentation.

It is also important that you are open and honest with the ATO and their investigators, and respond to any requests for information promptly.

The ATO has vast legislative powers available to it if there is a reasonable suspicion that an individual or business is not meeting its tax obligations.

For this reason, it is important to get professional advice quickly if you suspect you may have difficulties meeting your tax obligations, or if you otherwise have any concerns about the ATO audit process and powers.


Contact Us


For more information, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.

Read more about our Tax Law services here.

Related Blog – Tax Avoidance vs Tax Evasion: Key Differences & Consequences

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