A trio of trip-wires businesses should avoid, says ATO

Wayward habits accentuated by the pandemic will be a compliance focus.

Businesses should be alert to three potential tax return trip-wires that could run it up against ATO compliance this year, Assistant Commissioner Andrew Watson said.

Speaking on this week’s Accountants Daily podcast, Mr Watson said the office was focusing on three areas when it came to business claims. The first centred on a trend reinforced by work from home during the two years of the pandemic.

“It’s been around for a while as an issue, but probably as we’ve all experienced over the last few years, some of the lines between work and home have blurred as we’ve gone into lockdowns and many business owners – they might have business premises – but have done more work out of home,” he said.

“Just make sure that apportionment is happening and you’re not just claiming business expenses that include an element of private expense.”

He said a second area of scrutiny related to businesses omitting some aspects of their income, a problem that had risen over the last couple of years.

“That might be doing some business through a shopfront and also doing some through a sharing economy platform – whether it be a restaurant through Uber Eats or a tradie working through Airtasker. Just make sure that all those different sources of business income are reported,” he said.

He said the ATO’s random audit program revealed a strong correlation between compliant businesses and good record-keeping, which was a third area of focus.

“There’s a random audit program that helps us to estimate the tax gap. It helps inform us where people get things wrong, but it also shows us what are the common characteristics of people that get stuff right,” he said.

“And we do see that businesses who have got good digital systems, get good advice including how to set up those systems, and then keep good records on those, are a lot more likely to be compliant with their tax.”

Complete records were fundamental, he said.

“You need to make sure that you’ve got sufficient records to be able to substantiate those claims,” he said. “And that also at times includes when you’re apportioning those private and business expenses, you record sort of the rationale of why you’re splitting those up.

“So if anyone is still keeping that shoebox, the ATO app has actually got a neat little functionality to record some of those receipts but there’s also plenty of commercial offerings that as you’re going along, you take a snap on of that receipt and it just stores them away.

“So it’s a digital shoebox, but it does make life a lot easier for yourself and your tax agent when it comes time to doing your tax return.”

Philip King
29 August 2022
accountantsdaily.com.au

More Articles

TRANSITIONING INTO RETIREMENT: WHAT YOU SHOULD KNOW

Deciding on your retirement funding options comes down to personal choice. . If you’re close to...

Read full article

The Deadliest pandemics in History

Check out the Deadliest pandemics in...

Read full article

Middle-to-higher incomes boosting SMSF growth

The SMSF sector experienced healthy growth over the March quarter, with men and women on middle-to-higher...

Read full article

The superannuation changes from 1 July

The super changes on the way from the start of the 2024-25 financial year. . A number of...

Read full article

Investment and economic outlook, May 2024

Region-by-region economic outlook and latest forecasts for investment returns. . For the last...

Read full article

Downsizer contributions can be time critical

With the expansion of the downsizer contribution, the timing of when it is used can affect how to use...

Read full article

Deeming freeze a win for Age Pensioners

Why the decision to keep deeming rates on hold may be a window for interest rates.   . In...

Read full article

Plan now to take advantage of stage 3 tax cuts

With the stage three tax cuts set to be implemented in around six weeks, opportunities for tax-saving...

Read full article

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

Financial Services Guide - Disclaimer & Privacy Policy

^