How to Minimize Your Risk of Being Audited
For small and large business owners in Australia, the Australian tax office tends to keep a closer eye on their financial activities and reporting practices. Businesses work with more complex tax laws and they also tend to have more loopholes available to exploit. As a result, any anomalies that are suspected by the Australian Tax Office may lead to an audit of your business and personal finances.
Tax preparation services can enable you to prepare all your financial documents and reduce the risk of an audit. They can also ensure you remain compliant with all financial regulations. Here are several tips for reducing the risk of an audit.
Ensure your lifestyle matches what you earn
The taxation office may be concerned with how your lifestyle matches how much you earn. Business owners that are reporting a low income and yet are living much higher end lifestyles may cause enough reason for an audit to be carried out. This is because the Taxation Office may be concerned about avenues that the business owner is using to hide cash from being taxed.
To avoid being audited as a result of your lifestyle, ensure that what you're reporting to the tax office matches how much you earn. If there are any discrepancies, be prepared to explain. Taxation services can help you prepare documentation that reconciles any discrepancies in your financial reporting and your lifestyle.
Check your compensation and benefits
The tax office will also check to see how much you're compensating yourself from the business. If you're paying yourself too much or too little, it could raise red flags for an audit. The tax office will compare your levels of compensation with industry norms to determine whether your amounts are reasonable. This can include your salary, the salary of employees, and work-related benefits.
To minimize an audit risk related to your compensation levels, work with a taxation services company to establish the best rational for drawing salary and benefits from the business. Taxations services personnel are familiar with industry norms that govern your business and they can provide the necessary advice.
File your taxes on time and according to established guidelines
One of the most common reasons for an audit is filing tax returns late or failing to file them in the proper manner. Indeed, the guidelines for filing business taxes with the tax office and be complicated.
Make sure you work closely with taxation services to make sure everything is filed as legally required and in the appropriate timelines.