Company Tax Audits

Company Tax is payable by businesses on the amount of income it has generated in a given financial year. The tax office conducts Company Tax Audits to ensure that business owners are compliant with their legal obligations and are conducting their business fairly within the tax system.

We have included some brief information below about Company Tax Audits.

For more detailed or specific information regarding Company Tax Audits complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) to arrange an appointment.

Micro-businesses

Personal services income

The ATO is examining the status of personal services businesses to verify whether they legitimately pass one of the personal services business tests. The ATO pays close attention to deductions that are not allowed by the legislation. The ATO will review 270 taxpayers who may be subject to the alienation of personal services income legislation.

Losses

This year the ATO will:

• Review 200 claims for losses that may not be eligible to be claimed in the current year under the non-commercial losses rules;
• Complete the current reviews of a number of consolidated groups to identify incorrect consolidated memberships; and
• Continue the focus on the eligibility of participants in the boat charter industry to claim business losses.

Small-medium Size Enterprises

Losses

The ATO is continuing to review the large number of small to medium enterprises that generate and recoup losses as the ATO works to identify non-compliant practices such as:

• Claiming inappropriate and inflated deductions;
• Under-reporting income;
• Profit-shifting;
• Recouping losses but not taking into account changed ownership or the fact that a different business is being conducted;
• Misclassifying losses as capital or revenue;
• Using loss arrangements to minimise tax, where the origin of the losses is artificial and has no economic or legal basis;
• Attempting to use related-party losses outside of the consolidation regime; and
• Creating losses by incorrectly using the consolidation cost setting rules, or otherwise incorrectly applying the consolidation loss rules.

Large Businesses

Income and Deductions

The ATO is paying close attention to significant adjustments made to income and expenses, particularly in cases where profits are significantly reduced by tax reconciliation adjustments. The aim is to ensure that:

Items of income are not improperly deferred or claimed as capital items; and

Items of capital expenditure are not claimed as revenue deductions.

The ATO will also review large deductions for research and development, particularly in the banking and mining sectors.

Losses

This year the ATO is reviewing high-risk cases where businesses have declared losses, checking the:

• Validity of losses being carried forward;
• Origin of losses generated; and
• Origin of losses transferred into consolidated groups.

Our dedicated team can assist you with all your auditing needs. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.