Prepare for surge in GST audits, ATO warns tax agents

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The Australian Tax Office (ATO) is intensifying its scrutiny on GST compliance due to a noted discrepancy between GST receipts and the amounts it expects. The aim is to address this gap and enhance compliance. This article delves into the criteria for audit selection and highlights the importance of maintaining accurate records for GST.

Key Areas of Focus:

  • GST Audit Surge: The ATO is increasing GST audits to bridge a $6 billion difference between collected receipts and anticipated amounts.

  • GST Compliance: There’s a spotlight on GST compliance, and both BAS and tax agents should prepare for an uptick in audit activities.

  • Audit Selection Criteria: The ATO uses various indicators for selecting entities for an audit. These include:

    • Size of turnover and GST liability.
    • Deviations from previous GST lodgements.
    • Past compliance history.
    • Consistently late lodgements, extension requests, and payments.
    • Industries with high cash transactions, especially retail.
    • Sectors involving large, complex transactions such as property.
    • Financial records that deviate from industry standards.
    • Discrepancies between income tax and GST records.
    • The magnitude and regularity of GST refunds.
  • Best Practices for Bookkeepers: To ensure favorable audit outcomes and adherence to the latest regulations, bookkeepers are advised to:

    • Stay updated on GST regulations and audit methodologies.
    • Adopt specialized accounting software tailored to GST compliance.
    • Identify and assist clients with potential compliance challenges.
    • Prioritize data quality and accuracy.
    • Leverage AI tools, such as Dext and XBert, for data validation.
    • Emphasize the importance of systematic record-keeping in line with industry standards.
    • Familiarize themselves with the ATO Charter to understand its obligations.
  • Notable Figures and Actions: The GST gap estimate for FY22 is $8 billion, an increase from the previous year. In the past two years, GST fraud, influenced by social media, is estimated to have resulted in losses of around $1.6 billion. As a countermeasure, the ATO initiated Operation Protego, leading to actions against numerous taxpayers and several prosecutions.

Summary: The ATO’s proactive stance on GST compliance necessitates meticulous record-keeping and timely adherence to regulations by taxpayers and bookkeepers. Understanding the audit selection criteria and being proactive in compliance can help mitigate audit risks.

Important Note: Please ensure you retain a copy of your invoices on file, especially those for significant capital purchases. Also, it’s crucial to ensure your audit insurance cover is up to date.

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