The Australian Taxation Office (ATO) is increasing its focus on businesses that make incorrect tax deductions and GST claims.
With more sophisticated data and analytics tools being used to identify claims that don’t align with tax rules, businesses need to make sure their records are accurate and their claims can be properly supported.
For business owners, this isn’t just about avoiding an ATO audit or penalties. Accurate financial records can also play an important role when applying for business finance.
What is the ATO looking for?
The ATO has highlighted several common issues that can lead to compliance action, including:
- Claiming private expenses as business deductions
- Over-claiming GST credits
- Claiming GST credits where GST was not included in the purchase price
- Providing incorrect information in BAS or tax returns
- Failing to maintain adequate financial records
While some errors may be accidental, businesses that deliberately over-claim deductions or GST credits can face more serious consequences.
Depending on the circumstances, this can include amended tax liabilities, audits and penalties.
Why accurate records matter
Keeping your financial records up to date is an important part of running a business.
Clear records help support the deductions and GST credits you claim and make it easier to identify mistakes before a BAS or tax return is lodged.
There is another benefit that business owners may not immediately consider: finance applications.
When applying for business finance, lenders generally need reliable information about the business’s income, expenses, assets, liabilities and overall financial position.
Incomplete or inconsistent financial information can make the assessment process more difficult and may lead to requests for additional documentation.
Having well-maintained records can help provide a clearer picture of how the business is performing.
Don’t wait until you need finance
Business owners often think about their financial records when tax time or BAS lodgement approaches.
However, keeping your financial information organised throughout the year can make a difference when you need to:
- Apply for a business loan
- Purchase business equipment
- Expand your operations
- Refinance existing business debt
- Purchase commercial property
- Manage cash flow
- Demonstrate the financial strength of your business
Being “lender-ready” means having financial information that is accurate, consistent and easy to substantiate.
Review before you lodge
Before submitting your next BAS or tax return, consider reviewing your records and making sure your claims are properly supported.
If you’re unsure about whether an expense is deductible or whether a GST credit can be claimed, speak with your accountant or registered tax professional.
And if you’re considering business finance, understanding what lenders look for early can help you prepare well before you submit an application.
Need help understanding your business finance options?
We can help you understand what information lenders may require and explore finance options that may suit your circumstances.
General information only. Tax treatment can vary depending on your circumstances. Speak with your accountant or registered tax professional for advice about your specific tax obligations.
