“10 Do's and Don'ts For Dealing With An ATO Audit”
To help you understand the options available to you and how you should go about managing an audit by the ATO, here are Mathews Tax Lawyers’ top 10 Dos and Don’ts for dealing with an ATO audit:
Except for a few extreme masochists, nobody likes to be audited by the ATO.
However, the financial and taxation affairs of individuals and businesses come under the scrutiny of the ATO every day. This often results in the ATO commencing a risk review or formal tax audit to identify any inaccuracies, whether accidental or intentional. As a result you, as an individual or business owner, could be faced with the daunting prospect of an ATO review or audit.
1. Do contact the ATO auditor immediately and let him or her know that you intend to cooperate fully with the investigation
Cooperation counts and makes the audit process considerably smoother for all parties involved, especially you. When you resist the audit process or act indignant, the auditor may assume that you have something to hide from the ATO. This could have the effect of expanding the ATO’s investigation to other income years, increasing the chances of the auditor uncovering further inconsistencies that weren’t within the original scope of the audit.
2. Don’t try to handle the ATO audit on your own
Handling a tax audit by yourself is dangerous as the audit process is complex, confusing and rife with risks for those without the relevant knowledge and experience. Many taxpayers, both individuals and businesses, engage us after they have attempted to handle a tax audit on their own and have found themselves in further hot water with the ATO. In such cases, our fees are sometimes greater than usual because of the additional time it takes to undo the damage already done by the taxpayer.
While we encourage you to enhance your understanding of what an ATO audit entails and what the potential penalties are, to avoid expanding the scope of the audit and incurring additional costs – including being hit with additional penalties for making errors and providing the ATO with misleading information – don’t attempt to manage the audit alone.
3. Do consult with Mathews Tax Lawyers about your case as soon as you have been notified of an impending ATO audit
We are experienced in representing taxpayers before the ATO audit division and can assist you with all aspects of the audit, starting with an audit strategy that sets out how we will manage the audit on your behalf.
Don’t get angry or panic. This is counterproductive to your case, and as getting emotional may distort your judgment or cause the auditor assigned to your case to take offence, allowing your emotions to get the better of you could have a negative effect on the outcome of the audit. It’s vital that you keep cool, calm and collected throughout the audit process and take things one step at a time.
4. Don’t get angry or panic.
This is counterproductive to your case, and as getting emotional may distort your judgment or cause the auditor assigned to your case to take offence, allowing your emotions to get the better of you could have a negative effect on the outcome of the audit. It’s vital that you keep cool, calm and collected throughout the audit process and take things one step at a time
With Mathews Tax Lawyers in your corner, you can rest assured that you’ll be kept up to date with how your audit is progressing, keeping you abreast of any developments, and that we’ll be in contact immedi- ately if there’s anything that we require from you to assist with your ATO audit.
5. Do consult with us to discuss your tax return and the potential high-risk areas of the impending audit.
If you had your tax return prepared by someone else, like a tax agent, for example, you will need to have that person go over their file with you and explain how they arrived at the numbers on the return. A reputable tax agent won’t charge you for this service and should provide you with the information required for the audit. Moreover, as there may be quite a few figures involved, it’s vital that you take notes so that we can discuss any errors or inaccuracies identified with you
6. Don’t sign any documents without first consulting us.
Even if the ATO auditor asks you to sign something, it’s imperative that you don’t sign it without first speaking to us and discussing the documents in question. By law, the ATO auditor must allow you to consult with your tax lawyer whenever you request it, especially before you agree to any ATO statutory extension of the investigation. While we may be able to undo any damage caused by you signing documents without first seeking advice, this may increase the time it takes to manage the audit.
7. Do collect as much information required for your audit as you can.
Then assemble your financial records and returns by year and category of income and deduction to aid the audit process. If you have claimed deductions and this area of your return is in dispute, you may need to fill in any gaps in your records by contacting suppliers, retailers and service providers. If you can’t provide evidence of a deduction that you’ve claimed on a tax return, especially a major deduction, this could pose a problem.
Making the effort to get organised and prepared in readiness for your ATO audit significantly increases your chances of a favourable outcome, as it aids the auditor in doing their job and shows them that you’re trying to assist and not attempting to hide anything from them. The more willing to assist the ATO with their audit and investigation you appear, the better for your case.
8. Don’t ever lie to the auditor, whether verbally or by providing false or deliberately misleading information.
This could result in an ATO criminal referral for prosecution or the imposition of ATO civil fraud penalties and will almost certainly hurt your chances of a favourable resolution to the ATO audit – it happens every day and could happen to you. Also, lying to or misleading an ATO auditor may cause them to expand the scope of the audit to other tax years and that means more errors could be uncovered and further penalties could be imposed.
When scrutinising your financial records, if you find something that doesn’t look right, whether a mathematical mistake, an oversight or a simple human error, don’t pretend that it didn’t happen, own up to it by contacting the ATO immediately. Being honest and upfront about any errors or inconsistencies may help to reduce any penalties that the ATO could potentially apply.
9. Do be respectful and understanding towards the auditor always.
No matter how unfairly you may feel you’ve been treated by the ATO. It never hurts to be liked by the individual responsible for conducting your audit, but it could be fatal to be disliked by an ATO auditor because of you being angry or disrespectful. Just like you, the auditor assigned to your case is a person with feelings and talking to them rudely or in an impolite manner will only serve to hurt their feelings, and will likely make them less inclined to help you
10. Don’t accuse the ATO of harassment, no matter how much it may seem that they are harassing you.
No one ever won an ATO audit because they accused the ATO of being a pain in the butt. This is a useless argument unless, of course, the ATO auditor assigned to your case is way out of line. If that occurs and you believe that a line has been crossed, don’t get angry or make accusations, go directly to their group manager or supervisor and lodge an official complaint.
Mathews Tax Lawyers draws on our more than 30 years experience in the tax profession, including extensive experience at the Big 4 and the ATO, to provide reliable tax audit services for both individual and business clients. If you have been notified by the ATO that you’re to be audited, we’re the taxation professionals to call.
For expert advice and assistance in dealing with your Tax Audits in Australia, please contact Mathews Tax Lawyers on 1800 685 829
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.