The Australian Taxation Office (ATO) have done a fantastic job during the pandemic administering the various stimulus packages. But let’s be honest, life is usually less stressful when you don’t hear from them.
Sometimes the “please explain” letters can easily be resolved but let’s try to avoid them altogether.
Here’s 5 mistakes you need to avoid;
- Thinking the tax office is the enemy – the tax office is actually your friend.
That’s right! You heard me. The tax office is actually your friend so if you have a problem reach out to them. Your accountant can do this for you. They will be far more accommodating if you’re proactive.
They’re remarkably flexible and especially in the grips of a pandemic because they don’t want businesses going broke. A broke business can’t pay tax or employees, which is bad for the economy.
- Don’t be cute! The ATO uses complex data matching software to identify anomalies in your accounts
Gone are the days the tax office needs to manually cross check data. In 2020 this is mostly done automatically, which means it’s a lot easier for the ATO to pick up discrepancies.
For example, the ATO can easily get a report on investment sales you made during the year. If you have omitted to include them in your tax return, there is a good chance you will need to explain why.
- Don’t be late lodging your tax returns
Life can get busy. I get it. The ATO get it too. However, if you are consistently late in lodging your tax returns, the ATO might take the view that you do not have your house in order, which could mean you are more likely selected for an audit. If you can’t always pay, that’s ok – lodge anyway and speak to them about a payment arrangement.
- The tax offices use benchmarking techniques to report your personal use of motor vehicles and other fringe benefits
When your accountant lodges your tax return there are certain things the tax office want to know – such as did you incur motor vehicle expenses. The ATO may make a fair assumption that motor vehicles bought by the business can sometimes be used privately.
If it is used privately, the business owner needs to wrestle with another tax called Fringe Benefits Tax (FBT). If the business is not completing an FBT return or receiving a reimbursement for private use (which is also reported on the tax return), the tax office may start to get a bit suspicious.
I once heard from an unofficial source that ATO officers visit footie carparks during the weekend to take note of motor vehicle registrations!
- Don’t be late on your staff Superannuation payments
This has always been a bit of a bug bear for the ATO and for good reasons. It upsets them so much that they recently allowed an amnesty, where they gave employers a chance to get their hands clean and get up to date without incurring the usual penalties. I suspect they will crack the whip a lot harder moving forward.
With the introduction of single touch payroll, the ATO do not need to do as much digging as they used to in order to find situations of non-compliance. Please remember that the late payment of superannuation is not tax deductible (a lot more expensive) and also company directors can be held personally liable.
Here’s a solution; pay your superannuation the same time you pay your staff. This can be done with one click in your payroll software, meaning you are always up to date and have a better view of your cash position.
Need help staying in the ATO’s good books?
If you or someone you know needs help, don’t keep me a secret – I’d love to help. Good advice can boost your assets by hundreds of thousands of dollars and bad advice can be catastrophic.
So, feel free to drop me a line by clicking below.
Thanks for reading!
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