Last year the government implemented a 55% increase in audit funding over the next four years. A target of $3.7 billion is anticipated for the gross revenue that will be raised as a result. So what does this mean for you? We suspect an increase in audit activity in relation to individual, business and SMSF lodged returns.
Think about lodged returns as if they are stones which are skipped into a river once lodged. Historically the Australian Taxation Office (ATO) would fish out these stones haphazardly with a net, which were amidst an abundance of water and other stones. Now, imagine that the river has dried up. This makes it a lot easier to identify each stone. In fact, better clarity would encourage closer inspection of each stone.
Thanks to refined data matching technology, these days the ATO is more agile in deciphering information and ‘drying up the river’. Data matching becomes more sophisticated each year. This makes it simpler and far more likely for previously untargeted tax payers to encounter audit activity, despite compliancy.
The ATO, along with other relevant government revenue authorities have unprecedented access to tax payer records, allowing them to specifically target previously unreviewed tax returns. Now more than ever you could be at risk of audit activity.
Lodged returns can be accurate and still receive further inspection by the ATO or other relevant government revenue authorities. These bodies have made it their mission to ensure that they are thoroughly reviewing the tax affairs of all Australian individuals, business and SMSFs. In particular we are seeing the ATO is currently focussed on:
Even if no adjustments are required to your lodged returns, significant costs can still be incurred in order to satisfy the requests of the ATO or other government revenue authorities instigating the audit, enquiry, investigation or review.
To find out how you can be protected against the ramifications of audit activity, talk to us about our optional Audit Shield service.