To get yourself into the best possible shape for a tax audit:

	Verify the cost of all assets so that depreciation rates may be confirmed.
	Check all records of capital expenditure to ensure that none has been used for non-business purposes.
	Ensure that all sales have been properly recorded.
	Check that you have substantiation for all motor vehicle expenses.
	Check the accuracy of all fringe benefits tax declarations.
	Check that you have substantiation for all travel expenses.
	Check that you have full details of all payments to subcontractors, including names and addresses.
	Check that any declarations of interest or dividends match the amounts credited in bank or dividend statements.

 

Why and How?

The ATO will target different areas from time to time, however, some business 'attract' attention by:

	Using a corporate structure to split personal services income.
	Making excessive claims for depreciation.
	Using business capital for non business purposes.
	Not recording all sales.
	Making excessive claims for motor vehicle expenses.
	Understating FBT liabilities.

Audits may be conducted by mail, phone or face-to-face, but will usually target specific areas of your return.  You will be asked to explain your reasons for claims, omitted income or excessive deductions and may be asked to produce documentation to support your claims.