• Cash Business

Are you operating your business entirely on cash? Do you provide your product or services for cash payment only? If yes, ATO is keeping a close eye on you.

Most business owners don’t declare their income correctly, which shows their expenses as abnormally higher than the revenue generated that garners the attention of the tax office.

• International Transactions

With a rise in the number of businesses operating offshore or overseas, ATO has shifted its interest to companies making international transactions and fund transfers.

It takes into account how many times and to which overseas location the transactions are made and may ask to show the appropriate documentation for operating an overseas business.

• Information Discrepancies

In case, the Australian Taxation Office notices any discrepancies or variances in the information lodged, it will consider conducting a detailed review or audit.

The discrepancies that attract the ATO’s attention include:

• an income tax return and an FBT return on employee benefit contributions
• BAS and Payment Summaries on gross wages and PAYG withholding
• income tax return and business activity statement on total sales and expenses

• Exceeding Benchmarks

Whatsoever business you might be operating, if you have suddenly started exceeding the industry benchmarks, ATO will surely be having an eye on you.

It has a vast record of business activities and has formulated benchmarks that depict income and expense ratios.

In case, a business is inconsistent with its industry peers, it indicates the presence of tax issues, such as unreported income, transfer pricing and others.

• Other Triggers

There are other triggers like:

• History of late lodgements
• Failing to lodge FBT returns
• Reporting consistent operating losses
• Unusual fluctuations in trading performance

So, these were some red flags that may trigger an ATO audit. It’s better to hire an expert tax accountant to prepare your tax files and lodge your taxes to avoid the risks of tax audits.