Company Overview

This client is a professional services firm, employing 5 – 10 staff members, achieving an annual turnover under $2 million. This case study is a timely warning to other business owners who think they are not at risk of an audit by the Australian Taxation Office (ATO).

The Problem

When the ATO processes tax returns they ‘data match’ by cross-referencing information you have declared, against records provided to other government bodies (e.g. Department of Transport, Centrelink, AUSTRAC, Banks/Financial Institutions).

The client was notified of a Fringe Benefits Tax audit for the previous five years – this was triggered by a data match of their business vehicle registrations. The firm had registered two vehicles under the business but, before they became a Consolid8 client, had not filed FBT Returns to declare the car benefits.

The client faced over $100,000 in tax bills, interest and penalties. The ATO also indicated they may extend the investigations to a full audit of the business and its related entities – including income tax and employer obligation.

The Solution

The client engaged Consolid8’s Tax Team to manage the entire audit process and liaise with the ATO on their behalf. An ATO audit is a very involved process and can take months to complete. This particular investigation consisted of face-to-face meetings with ATO Compliance Officers and multiple requests for historical data and documentation. Consolid8 was able to support the client during the meetings to ensure all questions about corporate structure, tax treatment and other aspects of their business were answered correctly.

While compiling the requested documentation, our Tax Team found reference to a vehicle logbook (detailing minimal personal use of the company vehicle). Unfortunately, the original logbook had been destroyed in the Queensland floods. Consolid8 applied for a ‘Record Keeping Concession’ with the ATO. As a result, the tax payable has been substantially reduced as well as the penalties and interest.

The Result

Consolid8’s correct treatment of financial information and management of the process has ensured minimum liabilities for the client. The client now has Audit Insurance to ensure their accounting and legal expense in relation to tax audits are covered in the future..

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