Regardless of whether you are running a small business or have an established business, you must prepare and file an accurate tax return to avoid tax penalties from the ATO. This is because no one wants to attract penalties or an ATO audit. While most business owners are aware of this fact, few businesses ultimately face ATO penalties, which can be a costly and stressful affair. In this blog post, we’ll discuss things you should avoid doing to avoid getting into trouble with the ATO. Let’s get started:
What Mistakes Should You Avoid?
There are many things that you may be doing wrong, which could get you in trouble with ATO, so we have prepared a list for you so that you can avoid doing the following things:
Inaccurate tax deductions
Do you know what deduction you can claim?Or what deduction applies to your company? While it is completely okay to miss out on claiming potential tax deductions that you are liable for, it is definitely not a good idea to claim an inaccurate tax deduction. We always suggest our clients take full benefit of government grants and schemes while ensuring you don’t claim deductions you are not eligible for. In such a case, getting help from a professional tax return accountant would be a great choice, as they will help you with the tax deduction process and help you claim accurate tax deductions.
Failure to declare income
Failing to declare accurate income is a common mistake that can be made. You might make this mistake deliberately or consciously, but it’s suggested that you should avoid making such a mistake and consider the figures and facts you declare for your income.
Improper documentation
When we say documents, we mean you must have all the receipts that could help you claim potential tax deductions. Your claims on expenses without having accurate records could lead you to pay penalties. That’s why it’s always suggested to engage a professional bookkeeper for small business, so you can have the right and updated information that can support your claim and avoid paying unnecessary penalties. Record-keeping and maintaining all important documents is a time-consuming task, but a professional bookkeeper can help.
The gap in income and lifestyle
Individuals who have a lifestyle above their income are always on the ATO’s radar. It is hard to believe someone is enjoying a luxurious life while their business is losing money. In such a case, you will be under the ATO’s spotlight in no time.
What are Penalties for Making False or Misleading Statements?
You’ll be responsible for this penalty if you make a false or misleading statement (for example, in an activity statement, tax return, or amendment request) and it leads to a shortfall amount. If you have a tax agent, you’ll also be responsible for any false or misleading statements they make on your behalf. The shortfall amount is the difference between the right tax liability or credit entitlement and the amount worked out using the information you or your tax agent provides.
Penalties for Failure to Meet Other Tax Obligations
To calculate penalties, the ATO uses a statutory formula or multiples of a penalty unit. The ATO will notify you in writing if you are liable for a penalty, and it will include:
- the reason for the penalty
- the penalty amount
- the due date for payment (at least 14 days after receiving notice from the ATO).
When Do You Receive a Failure to Lodge Penalty?
You may receive a Failure to Lodge (FTL) on time penalty if you don’t lodge or report by that due date. This may include tax return lodgment, reporting Pay As You Go (PAYG) instalments, PAYG withholding on an activity statement, or goods and services tax (GST) by the due date. Despite this, you must always be aware of different types of taxes, for instance, payroll tax vs income tax, so you can lodge on time with the right amount.
Conclusion
The blog shares common mistakes that taxpayers often make during tax season, which can attract the ATO’s attention. However, all these issues can be resolved with strategic planning and engaging Reliable Melbourne Accountants.