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The Tax Office has revealed its criteria for audit selection and what raises red flags.
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Prepare for surge in GST audits, ATO warns tax agents
23 October 2023
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10 minute read
The ATO is ramping up GST audits to bridge the $6 billion gap between receipts and what it believes is owed, bookkeepers are being warned.
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The Australian Bookkeepers Network has alerted members that the Tax Office was focusing on GST compliance and BAS and tax agents could expect to experience a surge in audits.
ABN director Peter Thorp said the ATO had outlined warning signs and told members that conscientious record keeping was essential.
“Bookkeepers can have a significant impact on an audit's outcome,” Mr Thorpe said. “Accurate financial records and timely compliance are critical in shaping a favourable audit result.”
He said the ATO had outlined its GST red flags and how it selected audit targets.
They included:
- Size of turnover and GST liability.
- Notable deviations from previous GST lodgements.
- Previous compliance history.
- Repeatedly late lodgements, extension requests and late payments.
- Retail industries and those with high volumes of cash transactions.
- Property and other sectors involving large, complex transactions.
- Financial records that deviated from industry norms.
- Misalignments between income tax and GST records.
- The size and frequency of GST refunds.
Mr Thorpe said bookkeepers should make sure they were up to date on the latest
GST regulations and audit processes. He also encouraged the take-up of specialised accounting software and tools tailored to GST compliance that could automate aspects of the bookkeeping process.
“Even with proactive measures in place, audits can still happen,” the ABN said. “In addition to understanding the GST audit process, bookkeepers can adopt these good practices:
“Identify problem clients: Recognise clients with potential compliance issues and help them rectify their financial matters.
“Ensure data quality: Emphasise the importance of data quality and accuracy, encouraging clients to get it in order before lodging a BAS.
“Utilise AI for data validation: Employ AI tools such as Dext and XBert to validate data integrity and accuracy.
“Emphasise record-keeping: Stress the significance of meticulous record-keeping, ensuring it aligns with industry norms and regulations.
“Understand ATO charter: Familiarise yourself with the ATO Charter, understanding the obligations it places on ATO conduct.”
The ABN said the ATO estimate for the GST gap for FY22 was $8 billion, up from just over $6 billion in the previous year.
Increased GST audit activity by the ATO follows widespread GST fraud spurred by social media over the past two years, which is believed to have cost around $1.6 billion.
In response, the ATO set up Operation Protego and has taken action against more than 56,000 taxpayers and pursued criminal prosecutions.
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