The ATO has a responsibility to the community to ensure everyone complies with Australia’s tax laws. For this reason, they conduct audits and investigations to check the accuracy of the information that’s provided to them. The audit process can be a very stressful and frustrating experience. It is important to be proactive and seek advice on an appropriate risk management strategy to minimise your exposure and potential liability to the ATO.
Notification of Review/Audit
Where there are serious non-compliance issues, the notification stage is an ideal opportunity to submit a carefully drafted voluntary disclosure as it helps manage the situation and minimises your exposure to harsh penalties. It is important to confine the scope and focus of the voluntary disclosure to ensure that your intentions are not misconstrued and your entire affairs do not come under scrutiny. The ATO are not limited to any review periods where they suspect there has been fraud or evasion by the taxpayer.
The ATO initially conducts either a comprehensive or specific risk review to determine if there are any compliance issues requiring a more in-depth investigation and response. With the right approach and representations any compliance issues can be put to reset at this early stage, avoiding the need for an audit. If significant issues remain unresolved, the ATO will finalise the risk review and proceed to an audit.
Audits are more comprehensive than risk reviews and involve intensive case examination where the ATO strongly suspects underpayment of tax. They provide a means for the ATO to:
- check that the appropriate tax has been paid;
- gather evidence of underpayment of tax or any other concerns; and
- understand the causes of non-compliance to ensure that they are addressed by the taxpayer in the future.
Audits can take up to 18 months or longer before they are finalised. It is imperative that the audit process is managed carefully as the ATO has discretion to broaden the scope of the audit if they identify additional risks during the audit. Lack of co-operation from the taxpayer is a common reason for the ATO to suspect that there are further underlying issues.
If you have been notified by the ATO of a review/audit of your affairs or are in the process of being investigated, you should immediately seek legal advice on your options, potential liability and strategies in dealing with the ATO. For advice or assistance please contact our team of tax solicitors at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.