Speaking to Accountants Daily, RSM director Andrew Graham said the ATO’s focus on work-related deductions means many businesses could be opening themselves up to audit over accidental slips.
“The ATO has again put small businesses on notice that they’ll be paying special attention to work-related deductions,” said Mr Graham.
“It’s essential for accountants to know what their clients can rightfully claim. Getting it wrong, either by accident or in an attempt to claim more than the business is entitled to, can open you up to being audited and, potentially, prosecuted.
“That understanding is more important than ever now that the ATO is using data analytics to sniff out cases of tax fraud. These systems can identify unusual claims or discrepancies in returns, and red flag certain businesses for further investigation.”
As the EOFY draws to a close, Mr Graham suggests that accountants take the time to help their clients avoid tax trouble by performing a ‘tax health check’.
“Accountants should perform a tax health check to confirm their clients are compliant with all relevant taxation requirements and legislation, as well as identify the best tax minimisation strategies for the client,” said Mr Graham.
“It’s crucial to balance the business’s need to minimise tax with the risk of being audited or potentially facing prosecution.”
While there has been much focus on substantiation for work-related expenses, Mr Graham believes accountants should also start scrutinising the veracity of business claims, especially in high-focus areas like fringe benefits tax.
“Before accepting clients’ tax deduction claims at face value, it’s important to verify them and to ensure they’re being claimed correctly. Payroll tax, land tax, and FBT are just three examples of areas that can be tricky,” added Mr Graham.
Further, Mr Graham believes accountants should not just limit their advice to tax, but instead help their clients review the business to help them hit the ground running in the next financial year.
“Some company structures are set up in the early days of the business and then never reviewed again, even though the company’s circumstances may change,” said Mr Graham.
“In other cases, company structures are set up for other reasons such as to streamline succession or estate planning or provide an income stream for family members.
“As business structures are taxed differently, it’s essential to review the structure to ensure it still reflects the current and future needs of the business and to ensure it’s optimised for tax purposes.”