The Australian Taxation Office (ATO) is increasing its cross-referencing of data from public records, financial institutions, and government agencies, to identify inconsistencies in business reporting. We are seeing more frequent inquiries regarding discrepancies, with financial consequences for businesses that aren’t fully prepared to explain any variances.

How Does This Impact Businesses?

Regulators expect businesses to be able to promptly explain any identified inconsistencies in information. Failure to be able to do so is seen as evidence of poor governance and record keeping. In turn this may lead to increased levels of inquiry.

Reviews and audits from the ATO and State revenue authorities can be time consuming, expensive and a distraction from other important business operations. Further, if errors are found, interest and penalties add up quickly.

Common Issues Identified by Data-Matching

 Some of the most common areas where discrepancies are being revealed include:

• Payroll Discrepancies: Variations between taxable wages reported in state payroll tax returns and annual reporting, when compared with other sources such as Income Tax returns of employers, Single Touch Payroll (STP) records, and Workers’ Compensation reporting.
• Fringe Benefits Tax: Motor vehicles registered in company names, but vehicles not reported in FBT returns, and/or employee contributions are not flagged in Income Tax returns.
• Income Tax Reporting: Differences between income and expenses reported in tax returns and other financial documents, such as Business Activity Statements.

Stay Ahead with Accurate Reporting

 To avoid audit activity and potential tax adjustments, businesses should ensure that all public lodgements and declarations are reconciled with their core financial records and are up to date. We recommend that these reconciliations form part of a business’ regular routines.

It is important to know your financial story and be able to explain any variances should a query arise. Clear, accurate reporting is essential in this era of advanced data-matching, where even small errors can lead to costly investigations.

Contact Pilot

With the ATO’s data-matching programs becoming more advanced, we recommend reviewing your systems, processes and governance to ensure any discrepancies across business records and reporting are able to be explained.

If you would like assistance in any of these areas, please contact Murray Howlett or your Pilot advisor on 07 3023 1300.