Goods and Services Tax (GST) Audits

Goods and Services Tax (GST) is payable on the supply of most goods and services in Australia (as well as some other specific items). Due to its complex nature, the tax office often conducts GST Audits to ensure that taxpayers and business owners are adhering to their legal obligations and operating fairly within the system.

We have included some brief information below about GST and GST Audits.

For more detailed or specific information regarding GST 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

This year the ATO will:

• Phone and/or visit micro businesses to check the accuracy of information submitted in 7,100 activities;
• Conduct 600 reviews and audits to deal with GST non-compliance in property transactions;
• Undertake approximately 780 comprehensive audits of businesses where the ATO believe there may be serious evasion and fraud; and
• Check 55,500 refunds to improve GST compliance.

Small-medium Size Enterprises

To improve GST compliance, this year the ATO will:

• Review businesses whose GST management practices have failed to keep pace with their growth;
• Check that public share floats and real property transactions have been properly reported; and
• Investigate small to medium enterprises that appear to have under-reported GST or over-claimed input tax credits.

Large Businesses

a. Refund Policy

The ATO will continue to monitor large GST refunds and undertake pre- and post- issue verification to ensure that the correct amounts are claimed.

b. Property and Construction

The ATO continues to look at claims that involve the use of the GST margin scheme to ensure that:

• Valuations for the GST margin scheme are not excessive and comply with the law; and
• Stamp duty, construction costs or other expenses are not used to inflate valuations for acquired property.

The ATO will examine transactions to ensure GST has been properly accounted for under the GST adjustment provisions such as:

• Adjustments for changes in credible purpose.
• Adjustment relating to the sale of a going concern and cessation of business.

c. GST Aggressive Tax Planning

In particular, the ATO is focusing on detecting aggressive tax planning arrangements designed to avoid or reduce GST payable, including:

• International arrangements, particularly where businesses restructure to artificially sever a connection with Australia;
• Financial supply arrangements designed to produce inflated input tax credit claims; and
• Second-hand goods arrangements that seek to circumvent the intended operation of the law.

d. Financial supplies

Specific areas that will attract the ATO attention this year are:

• Supplies of services to associated entities at less than market value;
• Recovery of GST on costs relating to mergers and acquisitions; and
• Recovery of GST using a fair and reasonable apportionment methodology.

e. Integrity of business systems

Some large businesses have failed to keep up to date their internal corporate governance processes and systems for GST. The ATO continues to help large businesses address this deficiency.

During the course of audits, the ATO will pay attention to:

• Transactions processed outside of the accounts payable or accounts receivable systems, classified incorrectly and not captured in GST control accounts;
• Incorrect GST formula defaults or GST codes;
• Failure to report GST control accounts for reconciliation with business activity statements;
• Failure to update GST capture and reporting systems when other business systems are changed;
• Inadequate exception reporting to detect process or system failure; and
• Failure to recognise an adjustment event – for example, early payment discounts for customers.

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.

You may also wish to visit our dedicated GST website for more information – www.gstsolutions.com.au