The ATO or Australian Taxation Office, is responsible for collecting funds from citizens and businesses. Their job is to administer the federal taxation system and superannuation legislation. While the ATO serves an important purpose, most people would rather not attract their attention. So what are you doing that might put you on the ATO’s radar?
Your Economic Performance Varies from the Average
One way the ATO will look for signs of improper behaviour is through averages. They will compare your business’ performance to that of similar businesses in your area. If your numbers seem way off, then this could be viewed as a red flag. Make sure you have proper documentation and proof of all incoming and outgoing expenses and profits in the event that your business stands out as an anomaly.
Work Related Expenses That Seem Unusually High
Work related expenses can help you save at tax time. Make sure you provide accurate amounts and have receipts to show how much was spent and what it was spent on. If you have unusually high work related expenses, this could trigger an investigation by the ATO. Just like overall performance, your expenses will be compared to those of other similar businesses. This sets a standard so the ATO can identify oddities.
Living Large Without the Income to Support It
Your finances determine how you live. The average person generally lives within their means based on their income. If they make more, then they can spend more. If you are spending high, but your income is low, this will catch the eye of the ATO. Living outside of your documented means could be an indication that funds are being paid and not reported.
Large Transactions & Wealth Transfers
If you have a history of large one-off transactions, this might be considered abnormal behaviour. Moving money around could be viewed as a way to avoid paying taxes. As with all other tax-related transactions, make sure you have solid documentation and good reasons for shifting wealth around. If you cannot provide an adequate explanation and proof when the ATO asks, you may face stiff penalties.
Keeping Your Tax Affairs Secret
The ATO assumes that if you have nothing to hide, then you will be transparent when it comes to your taxes. If you appear to be hiding things and trying to conceal financial activity, this will draw attention. Low transparency is a very good way to get the ATO looking in your direction.
Stay Legal & Avoid the ATO
The best practices are the ones that keep you legal and out of the gaze of the ATO. Make sure you have proper documentation and all necessary forms filed the right way with the help of a professional. Contact BIS Cosgrove today to discuss your tax filing needs and protect your assets.