Our framework in assisting customers with tax audit is based on four principles, MEET, PLAN, ANALYZE, and NEGOTIATE.
ATO Targets 400 Small Businesses in March
The Australian Taxation Office (ATO) will visit 400 small businesses this March, focusing on takeaway shops, hair salons, and beauticians. This initiative aims to address the under-declaration of income commonly associated with cash-based operations.
In recent years, the ATO has significantly enhanced its data-matching technology. When processing tax returns, it now cross-references the declared information with records from other government bodies such as the Department of Transport, Centrelink, Workcover, Superannuation Funds, Banks, and Financial Institutions.
During a tax audit, a skilled accountant with deep knowledge of tax laws can make a substantial difference, potentially saving a client from severe penalties. A straightforward audit may take around 28 days, while complex ones can stretch over 3 to 4 years, with potential costs in the tens of thousands of dollars.
An experienced accountant specializing in tax audits will:
Deal directly with the ATO on the client’s behalf
Clarify the context of the audit from both a technical and personal standpoint
Review and present the client’s data
Negotiate with the ATO or file an objection to improve the audit outcome
A tax audit may sometimes begin as a simple request for clarification. However, mishandling it could escalate a minor issue into a major financial burden.
How EndureGo Tax Helps Clients During Tax Audits
At EndureGo Tax, our clients consistently view us as one of Sydney and Ashfield’s most trusted tax accounting firms. We take pride in delivering high-quality service, especially during tax audits. We collaborate closely with clients and ATO auditors to ensure accurate analysis and strive for the most favorable results, reflected in our 95% audit success rate.
Let us share a real example:
One of our long-time clients, Joe, ran a newsagency. We managed his bookkeeping and tax obligations. Early on, we identified that Joe didn’t have a functioning cash register—something we repeatedly advised him to implement. We also warned him that his business benchmarks were far outside the ATO’s expected range.
Eventually, the ATO audited Joe for this very issue. Although he was initially distressed, we followed our structured approach—Meet, Plan, Analyze, and Negotiate. We reassured him, met with the ATO auditor to understand their concerns, thoroughly analyzed his records, and negotiated on his behalf. As a result, Joe walked away from the audit with a highly favorable outcome.
EndureGo Tax will help you with tax audit to ensure to good outcome
We then structured a meeting between the client and the ATO tax auditor to make sure the auditor knows the client on a personal level, this has proved to be critical in reaching a favorable outcome for the customer during the audit. We then delivered the information as requested from the ATO to the tax auditor promptly.
The tax auditor did not look into the expense in-depth, as they had confidence in our bookkeeping work.
However, we told the client to hold on, as there was still some risks that if ATO gets its way without much objection from us
Client Faces Major Penalties Due to Lack of Proper Records
The client’s failure to use a cash register put them in a very unfavorable position, limiting what we could do to defend the audit findings. We made sure the client fully understood the seriousness of the situation and clarified that our goal was to minimize the damage as much as possible.
Eventually, the ATO’s audit report concluded that, based on industry benchmarks, the business underreported $200,000 in sales over a few years. This led to a significant tax adjustment, including penalties and interest. Although the ATO acknowledged the client’s inexperience in record keeping and applied a lower penalty rate, the client still faced a $100,000 tax liability for that audit year alone.
Objection Strategy Leads to Major Tax Relief
While the client initially considered accepting the outcome, we advised them to wait. We warned that a lack of objection might prompt the ATO to review other financial years, escalating the issue further.
To prevent this, we drafted a comprehensive objection report, citing relevant tax law and technical arguments. The ATO accepted our objection on a technical basis, allowing us to eliminate all penalties and interest. Additionally, we successfully negotiated to reallocate some of the additional income to other family members, further reducing the tax impact.
Our intervention brought the total tax bill down from $100,000 to just $10,000—a 90% reduction. Most importantly, the ATO chose not to expand the audit into other years, providing the client with peace of mind and long-term relief.
Lowest interest rate with EndureGo
We would like to help more clients reach a favorable position in the tax audit, this is especially with the renewed focus from the ATO on targeting the cash economy. Hence, we would like to give the first 10 customers a free 15-minute consultation time with our principal, John Cheng FCPA, to briefly review your financial affairs to determine the audit risk and succinct insight into how to reduce it. Please call John Cheng at 0410-829-900, or write to him at john.cheng@endurego.com. You can also raise the inquiry at our website.
