Dealing With The Tax Office

Case Study 1: Dealing With An ATO Audit

The problem

A new client came to us with a 40-page dossier of alleged breaches and faced $750K worth of fines and alleged unpaid tax.

An ATO audit is intimidating for any business. Even if they have done nothing wrong, businesses generally only have 60 days to lodge an objection to the ATO’s findings. Unfortunately, with the ATO’s new data matching system, audits seem to be becoming more and more common.

What did we achieve?

By taking the time to understand how our client’s businesses worked and undertaking a meticulous examination of the facts of the case we reduced the level of fines and unpaid tax by 90%. It turned out the ATO had fundamentally misunderstood the nature of our client’s money transfer business and had grossly over estimated their revenue.

The business charged a fee to transfer people’s money overseas but the ATO treated not only the fee, but all of the money transferred into our client’s possession as income. We uncovered this error, drafted an objection and were able to successfully argue our client's case.

Our client also faced the rejection of the valuation of his $1.2 million property as the ATO claimed he lacked sufficient supporting documentation. We countered this claim by using our industry knowledge, expert contacts and forensic accounting techniques to prove to the ATO the client’s property was worth even more than he originally claimed. Hence the ATO was force to accept this new valuation and reverse their original decision.

Case Study 2: Recouping Overpaid Tax

The problem

Our client ran a newsagency that sold lottery tickets and was paid a commission by NSW lotteries.

When we were appointed by the client, we reviewed the books and realised that their previous accountant hadn’t taken the time to understand the newsagency industry and treated the monies collected from customers as ordinary taxable income, but in fact only lottery commissions needed to be treated as the newsagency’s income. In other words the client was over declaring income and overpaying taxes and GST.

What did we achieve?

Using our many years of tax experience and industry knowledge we broke down the “commissions process” and understood what was required to recoup overpaid taxes.

We built a strong case and presented our findings to the Commissioner of Taxation and were successful in recouping tax, GST, and other flow through taxes to the clients benefit for the past 4 years.

Thus, we were able to claw back both overpaid GST and income tax from the ATO, almost to the value of $120,000.

Case Study 3: Dealing With Late Returns

The problem

Our client had lodged his tax return 8 years late and was subject to both an additional fee for its lateness and the interest that had accumulated over the intervening period. This came to a combined total of $87,000.

What did we achieve?

We had the entire $87,000 charge waived. Not only were we able to get the client a failure to lodge penalty reversal of $22,000, but we were able also to establish a strong case to get an interest reversal of $65,000.

With our long history of dealing with the ATO and our close attention to the details of clients’ circumstances we were able to convince the ATO that the lateness of his return had extenuating circumstances and thus were successfully reversed.

Summary

Tax Audits can be time consuming, stressful and a costly exercise but they are a fact of life if you run a business, own a rental property or have your own self managed superannuation fund. Our philosophy includes helping you protect your assets so we offer our clients the opportunity to insure against the accounting costs you might incur in a tax audit.

We invite you to book a FREE, one hour introductory consultation to discuss any current issues you may have with the Tax Office. To book a time, contact us today on (02) 8824 7848 or complete your details in the box at the top of this page.

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