Increasing digitisation of data and hence increased sophistication and speed of data matching, has allowed the ATO to have greater visibility of taxpayer’s transaction history, opening up the risk of audits should red flags pop up on your account.

The ATO is now proficient in linking interest and dividend income to provider databases (i.e. banks and share registries, and is increasingly linking in with state revenue departments and land titles offices to match property sales and high-value car purchases amongst a whole range of things.

You can be prepared for a potential ATO audit by ensuring that you have all the necessary documentation dating back a minimum of 5 years in place. A taxpayer subject to an ATO audit can have up to 28 days to gather the necessary documentation, and you can expect a high level of detailed inquiry regarding your transactions.

Maintaining documentation in electronic form, i.e. PDF’s saved in electronic filing systems, are sufficient subject to meeting the normal obligations. Evidence from the supplier to substantiate a tax deduction includes :

  • The name or business name of the supplier;
  • Amount of the expense and the currency in which it was incurred;
  • The exact nature of the goods or services purchased (1);
  • The date the expense was incurred (2); and
  • The date the expense was paid
  1. If the document the supplier gives you does not specify the nature of the goods or services, you may write in the missing details yourself before you lodge your income tax return for the relevant year.
  1. If the document does not show the date the expense was incurred, you may use a bank statement or other reasonable, independent evidence that shows when it was paid.

Voluntary disclosure is the best step to take if an error has occurred and been discovered. Generally, ATO case managers appreciate when information is willingly disclosed.

If you would like to speak to an experienced business bookkeeper in Melbourne about maintaining your receipts and invoices efficiently, then contact us for an appointment to talk about the best solution for your business.