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