Small business enjoys independent tax review
The Tax Office have made their independent review service a permanent feature of the tax landscape.
The service is open to any business with a turnover under $10m. So, if you are being audited by the Tax Office, and you receive notification of the audit results, you can request an independent person with the ATO to review the findings to ensure that the approach and outcome is fair and reasonable.
Currently 1,200 businesses were offered the service and 180 have used it.
This is a significant step as many smaller sized entities cannot afford to manage the complexity and costs of an audit. And having a person from within the Tax Office, who has never experienced your file before, is a good way to ensure that the net outcome of a tax audit to a smaller sized business is free of potential biases by an individual tax auditor.
An independent review is also important in that a smaller sized business will be able to attend an informal case conference to discuss the facts, the points of concern and ask questions. This meeting normally lasts one to two hours. Most communication with the Tax Office is typically done by letter and many families who own a smaller sized business have limited financial resources to develop a properly worded and intelligent response (or read the depth of law associated with the ATO response on the same subject).
A case conference also gives the opportunity for the decision makers in your audit process to see and understand the family behind the letters and reports.
An independent review service from the ATO can consider a range of taxes like income tax, GST, excise, luxury car tax, wine equalization tax or fuel tax credits. It will not cover fringe benefits tax, superannuation, interest costs or cases of fraud. And to proceed with the ATO review you only need to email the ATO within 14 days of receiving the final audit letter.
Importantly the ability to engage with the ATO for an independent review requires that you are subject to an audit or investigation. Getting your tax affairs “audit ready” prior to an investigation is an essential part of your family’s business governance and makes a significant step forward in your ability to manage an investigation. Such a position can take a deeply expensive and time-consuming task become relatively “uneventful” in the life cycle of a smart family operating a business or significant investment portfolio.
Importantly the independent review service is available to smaller sized businesses as well as the other options at their disposal. This could involve lodging an objection, using the ATO in-house facilitation service, contacting the Inspector General of Taxation or approaching the Australian Small Business and Family Enterprise Ombudsman.
These avenues are also important because while the “independent review” means that the person assisting has never been involved in the case before – they are still employed by the ATO. In extreme and rare instances the employment could be seen to impact their independence.
At Westcourt we typically find that very few of our clients are actually audited by the ATO. And this is potentially a result of the tax governance and checking of data we submit to the ATO from multiple data points. However the ability to engage in an independent review, with a case officer present so a family in business can present, in person their facts, and talk about their position with a fresh person within the ATO is a great move by the ATO.