Are you ready for an ATO audit?

I have heard from four retailers this week who are being audited by the ATO. Each expressed concern about the audit process, the information they are having too provide, the stress it is causing and worries about hat may be discovered.

An audit can be stressful. The extent of this depends on the reason for the audit and the approach of the auditor.

If then audit has been triggered by a report about the business or suspicion from the ATO based on your business against the benchmark for your channel, the auditor is likely to be looking for specific information, with a suspicious mind.

If the audit has been triggered by a random selection, it is likely to be more about your business processes and therefore less stressful. However, if the auditor discovers something of concern to could escalate quickly.

Any audit will be less stressful if you have accurate business records that can be shown to be recorded at the point of activity, without manipulation or intervention on your behalf. The ATO auditors are skilled in how POS software could be used and / or manipulated to hide nefarious activity.

ATO auditors will look for multiple pieces of evidence to support transactions. This includes banking records, POS collated records, supplier invoices, inventory data and even a live stock take done for the audit specifically. The process is robust. In many situations I have observed there is no hiding behaviour designed to hide from tax and other ATO overseen obligations.

To have a smooth audit:

1. Maintain good, professional and tracked data capture and management practices. record all sales in your POS software, at the item level. Arrive all inventory you sell into your POS software, at the item level. record all products returns through your POS software, k at the item level.
2. Record all supplier invoices and all income in your accounting software.
3. Do not manipulate POS software managed data to hide anything.
4. Do not take cash out of the business.
5. Do not pay employees in cash or some other way off the record.
6. Keep your b business records in a structured way, so they are easily accessed.

Know that the ATO has a benchmark against which it compares newsagency businesses. This benchmark is updated.

Saying you run a manual business without computerised records will not stop an audit. The ATO auditors are ready for the many and varied excuses they hear.

I am not on their side. The goal of this advice is to have you think abut your situation, so that you are prepared.

Note: I have no commercial relationship with two of those who contacted me this week.