Skip to main content Skip to search

Tax Audit

Tax Audit

A tax audit can be ordered by the Australian Tax Office if your income reporting or tax affairs are not managed appropriately. An ATO tax audit or review is performed when the ATO cannot verify or identifies discrepancies in the information you provided when reporting your income, assets and expenditure. Modern technology, including data-matching tools and the increasing information processing capacity of the tax office means that more tax audits are carried out each year. The ATO has a legal capacity to perform tax audits where it has reasonable grounds for doing so. It can also obtain information from other parties including employers, financial institutions, and business suppliers or customers as part of.

A tax audit can easily be avoided by ensuring that your income and assets are calculated and reported correctly. In many cases a tax audit is conducted when the ATO simply cannot accurately verify the information you provide them, so it is always best to ensure that this information is prepared and submitted by a qualified accountant or expert in auditing accounting.

Kingston & Knight Audit can assist you throughout the tax audit process by advising you about your rights and responsibilities and providing investigative / forensic audit services if required.  Our main way of providing assistance is to improve your communication and cooperation with the ATO throughout the tax audit process, potentially reducing any subsequent penalty you receive.

Audit Process

The tax audit process can involve only a review, and / or a complete audit of your finances by the tax office. There are important differences between an audit and a review, however it is worth noting that both audits and reviews are legally classified as a ‘tax audit’ giving the ATO additional rights when either process is carried out.

When conducting verification checks, tax reviews and tax audits, the ATO makes it clear that they will seek and respect your cooperation. Cooperating with the tax office during these procedures will be of significant benefit to you, even if the audit finds you to be in breach of your obligations. Therefore, it is recommended that you obtain the assistance of an auditing accounting firm, such as Kingston & Knight Audit, to assist you during the tax audit process and ensure that you do not face any unnecessary penalties.

Tax Review

A tax review is performed when the ATO has calculated a risk associated with errors in your reporting, or that there is a possibility you are not meeting your tax obligations. The tax review process then involves more detailed information being sought about your finances and income-producing activities. The ATO also conducts tax reviews to obtain information about targeted or emerging activities and industries of interest to the tax office.

It is important to note that the tax office considers any activity on your part to identify errors in your reporting during the review process, with the possibility of ‘significant reduction’ of relevant penalties. For this reason, it is vital that you obtain professional assistance following the commencement of a tax review.

Tax Audit

The tax audit process begins when the tax office contacts you (usually by telephone) to arrange a time to meet and discuss the audit process. This meeting will cover the scope and nature of the audit, including period under audit, the audit hypothesis, information sought by auditors to test hypotheses, how the auditors will conduct their investigation, and your rights and obligations throughout the tax audit process.

The tax office will communicate with you throughout the audit process and keep you informed of any relevant developments during the audit. For example, if the auditors decide to broaden the scope of the audit considering newly-identified information, you will be notified in writing. Throughout the tax audit you will be expected to act cooperatively and to assist the auditors in conducting their investigation.

Auditors Melbourne

Kingston & Knight auditors Melbourne will assist you in maintaining a cooperative, communicative, and compliant position throughout the ATO tax audit procedure. Any penalty imposed following the conclusion of a tax audit is likely to be reduced if you have actively cooperated throughout the audit or review process, and assisted auditors by conducting your own financial audit with which to supplement, and if required, challenge, the conclusions of the tax audit. To learn more about what Kingston & Knight auditors Melbourne can do to assist you during a tax audit or review, contact us today on 1800 283 471 or via email at audit@kingstonknight.com.au.