Audits are a stressful situation; the outcomes are generally unclear, and the process can seem unfamiliar to anyone who hasn’t been through one before. Be assured, most audits go fairly smoothly and are resolved in a reasonable time frame.
What is the ATO auditing?
This is the best place to start assessing your audit. Is the ATO targeting something specific (like superannuation, GST, sale of a property etc) or is it a more general audit (looking at all entities in the group over a number of years)? Specific audits like superannuation tend to run for less time as they are just looking at one area of law. This doesn’t mean you should let your guard down; it is possible for specific audits to turn into general audits if the ATO find reasons to do so.
Who should you talk to?
The best place to start is your accountant, they are your first line of defence against an audit. They will be able to assess the complexity of the case and should be able to start identifying the areas of concern. Depending on the complexity of the audit, a lawyer may also be required, this should be a specialist tax lawyer not the commercial lawyer you use for other transactions. Lawyers tend to get involved in larger or more complex cases. The earlier you can bring in the lawyer, the more value they can add to the audit. In some cases, you may even need a barrister, but this is generally where you are heading off to court or if you are trying to add more weight behind an argument to the Tax Office.
How long will an audit take?
This question comes up at the start of every audit and there is no definite answer. Specific audits tend to finish up quickly assuming you are providing the information required on a timely basis. They are often resolved within months of the audit being commenced. For general audits the answer is more ‘how long is a piece of string?’, as factors like the complexity of your structures come into play.
How much will it cost to defend?
This goes hand in hand with ‘how long will it take?’. Specific audits tend to be cheaper to run as you usually only need an accountant to assist. With general audits the costs can start to rise. If the accountant can run the audit directly the costs will be moderate. If additional parties are required (lawyers, barristers, valuers etc) the costs can start to escalate quickly. You will need to start to make some decisions in terms of if the case is worth defending and how much time and money you’re willing to spend defending your position.
Should I talk to the ATO?
Unless instructed to by your accountant or lawyer, the answer should be no. Whilst dealing directly with the ATO may seem like a way to save costs, most business owners are passionate about their business and defending their position and can tend to say things in a way that may antagonise the issue further.
Audit Insurance
Do you have audit insurance? A lot of business will have audit insurance and not even realise they do as it will be a small part of a larger business policy. Some accountants also offer specific policies around audit insurance. These policies can go a long way to covering the costs of running an audit defence, however you need to understand what is included and what is not included early on in the audit and not assume that all costs are covered. Some policies limit who can provide the services, so you need to understand this early on.
Further help:
The best thing for a business owner to do during an audit is to keep running the business to your best ability and try not to let the audit affect business operations. If you need assistance please contact us. We can take away some of the worry and stress so you can focus on your business. You can reach us on (07) 3023 4800 or at mail@marshpartners.com.au.
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