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The word on the street is that the ATO are going to be doing random audits of 100’s of small businesses. Even if your books are in pristine condition, audits are generally time consuming and quite stressful.
If you get called for an audit you can be assured that the tax office are going to want to see supporting documents to substantiate everything that you have put in your returns. Small businesses are required to keep all their records for a period of up to 5 years, so if you don’t have them start looking for them! Often suppliers will be able to go back and get copies for you. Also make sure all of your returns are filed and paid on time – and if you aren’t able to file them on time, let the tax office know.
It’s tempting to just put all your expenses on the one card and let the accountant sort it all out for you, but keeping your personal and business finances separate, including bank and credit card accounts can make life much easier. Not only for book keeping and avoiding mistakes, but it will also help make the audit process itself a lot simpler.
If you don’t already have an accountant, find one who could help you if you are called for an audit. These guys make their living out of audits, they know the ins outs of the audit process and are well placed to help you navigate these murky waters.
Think about getting a tax audit cover either as part of your business insurance or as a standalone policy. Whilst it won’t pay for any fines you may incur, it will help cover the professional fees and costs that you occur in managing your audit. This includes fees for accountants, lawyers, bookkeepers or any others advisors required to help you through the process. The cost for a small business audit can sit anywhere between $5,000 and $10,000, but this will all depend on the complexity of your accounts and the subsequent audit.