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A chain reaction – the audit process begins

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Surviving an ATO audit: Part one

It starts like any other day. You are in your office, busily working to provide value to your clients and finding ways to improve their businesses, when a call comes through – an ATO officer is on the phone. No doubt your stomach leapfrogs; just a little. When you hear the subject of the ATO’s call, your stomach drops completely.

The ATO is commencing a review of your client’s tax affairs, which may lead to an audit.


What are the effects of an ATO audit?

An ATO review or audit is never happy news. It takes time, effort and cost – your client’s time discussing the review/audit with you and/or the ATO; your time away from your main priority of improving your client’s business; your client’s effort in dealing with something that has already passed (previously lodged tax returns); and overall monetary costs.

Unfortunately, audits are also unavoidable. In a self-assessment tax system, someone must be reviewed to ensure the system remains fair for all.

There is a risk that your client relationship will be tainted as they associate the negative effects of the audit with you, as their direct contact to the process. This risk can be mitigated by a positive interaction with the ATO.

How should you handle an ATO audit?

The varied reactions that people have to the ATO can have a real impact on how smoothly an audit progresses.

Although there are no real rules around what you should say or do, some reactions are certain to hinder your chances of a positive interaction with the ATO, and potentially add more cost to your client’s audit.

Below are three tips you should keep in mind when dealing with the ATO.

1. Do not be passive

Passive compliance with the ATO’s requests during an audit is a common reaction, but it’s not necessarily the best one. The ATO might have a job to do, but your job is to ensure the review or audit progresses in the most timely and efficient manner.

Consider each item you are being asked to provide and whether you deem it relevant. If a query arises, don’t hesitate to phone the ATO and ask them to explain their request. Although this sounds simple in theory, in practice it is rarely done. If you do discover that certain information is irrelevant, you could save time and in turn overall costs for your client.

2. Do not be aggressive

The ATO will use their powers to make you cooperate, which may make for a very uncomfortable tax experience.

3. Be an active part of the process

Don’t hesitate to ask questions when and where necessary, and provide information based on an agreed understanding of what is required. Maintain some control of the review or audit process for the benefit of your client.

What does this mean for you?

Your client may be too concerned with the unwanted costs of their ATO review or audit to offer up a “thank you”, but by ensuring a comfortable tax experience you can both move on sooner and concentrate on the most important thing – building their wealth.

For further discussion on ATO processes and procedures, please contact us.

 

What’s next?

Surviving an ATO audit: Part two – The questions start coming

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