ATO audits of any tax claims are dreaded by most businesses. They place an immediate and often unexpected burden on the subject company to provide information they may not have immediately to hand. This is exacerbated by the potential penalties that are leviable for mistakes, which can be severe if wilful disregard for the rules or gross errors are uncovered. Even if you've done everything according to the available guides and your tax advisor's recommendations, there's always an element of uncertainty that something could be wrong which puts continual stress on all involved.
Having engaged with the ATO over several years in regards to client audits and ongoing product development, we've seen first hand how long and stressful this process can be if you are not adequately prepared for it and how well-intentioned business owners can fall short when it comes to having the right records and processes in place to support claims. Another factor that adds to this is timing, where claims under audit may be several years old and the people who originally compiled them may have moved on or lost the details of
All businesses should expect and be prepared for an audit within a 3 year forward window. Approximately 5% of all business claims are audited each year, so it is only a matter of time until you are subject to one, even if you've been audited previously. To help improve clarity around the requirements of a Fuel Tax Credit audit, we've created an easy to use tool that is free to use.
The Audit Readiness Scorecard helps users to understand how well they are prepared for an FTC audit by answering a series of questions about their process and records. While this isn’t a substitute for professional tax advice tailored to an individual organisation’s circumstances, it does help to rapidly increase your understanding of the expectations for your type of operation and how close you are to meeting them.
Of course, knowing what to do is only the start, you then have to put it into action and compile the materials and supporting information you need to reach your target level of readiness. This may seem like an arduous task at the time but when you do get the inevitable request for more information ahead of potential audit of your FTC claims, you will thankful you have everything needed to respond quickly. Moreover, by going through this process you will also be ensuring your claims are fair, reasonable and free of most errors which is makes supporting the claims significantly easier as well.
You can try the Audit Readiness Scorecard here.