You will be surprised to know that it doesn’t matter whether you are self-employed, work for wages or running a not-for-profit organisation when it comes to being selected for investigation by the ATO.
Occasionally, the ATO will target a specific group, but only if they find out that there is something dodgy about a particular segment – like FIFO workers claiming taxis to the airport or business owners not declaring cash etc. But on the whole, the ATO doesn’t bother anybody unless they look like they are doing something unusual. What is unusual? Well:
- Lodging your returns late all the time. This is a big indicator that you’re not well organised, and you don’t mind flouting the law…so you’ll be on the top of their list.
- Paying your tax late is nowhere near as bad as not lodging to start with. The ATO is usually quite happy to do a payment arrangement, provided you lodge on time, and YOU call THEM to put a payment arrangement in place BEFORE the due date. Capeesh???
- Having said that, the ATO doesn’t like to be used as a bank. So asking for payment arrangement after payment arrangement wears a bit thin. It shows that you aren’t putting the tax money away (and let’s face it…it isn’t your money) so don’t use it for other stuff.
- The ATO takes the view that most of the tax agents and the population at large are “doing the right thing”. They know this because they have years of historical data that they can look back on to compare to what you are lodging…and as long as you are “within cooee” of what everybody else in your industry is doing…then you are pretty safe.
- Lodge on time, every time
- Pay on time, but if you can’t…advise the ATO early (or through your tax agent) so you can put a payment arrangement in place.
- Most of all, put the tax money away so you aren’t tempted to spend it. Talk to your own tax agent – I use this simple rule-of-thumb: If you are a partnership or sole-trader, with no employees…and registered for GST…you should be putting at least 25% of what you bank away to cover your GST and income tax. If your business has employees, you need to put at least 35% of what you bank away – to cover GST, your tax…and your employees’ tax. Note – I’m talking about what hits the bank…not the ex-GST invoice total. Don’t forget about superannuation on top of this too.
- The 10% GST is not your money…and the PAYG deducted from your employees’ wages is not your money. Superannuation is a pay-rise that was diverted to super instead…so it is also not your money. Don’t mess with it. Get it as far away from you as possible, then you won’t be tempted.
- Operate your financial affairs according to accepted norms. If you come across a friend or a tax agent that is promising something that sounds almost too good to be true – it usually is. There is no such thing as a free ride these days, so don’t get sucked in by somebody that tells you they have a scheme that results in you paying really low levels of tax. These people are usually nowhere to be seen if you get “pinged” by the ATO.
Its common sense really, isn’t it?