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GST Audits on the rise: How to be prepared.

The Australian Bookkeepers Network (ABN) have been informed that the ATO are ramping up their efforts to bridge the GST tax gap, with BAS and Tax Agents expecting to see a surge in audits and an increased need to focus on GST compliance.

For the fiscal year 2022, the ATO estimated the tax gap at about 8% or $6b, emphasising the reason why the ATO is increasing audits to enhance GST collections.

Director of the ABN, Peter Thorp, explains that bookkeepers can prepare themselves GST audits, with more insight offered about the ATO's selection criteria for those audits. These include:

• Size of Turnover and GST Liability: The ATO closely considers the size of the taxpayer's turnover and GST liability.
• Historical Turnover or GST Liability: Any notable changes from historical periods in a taxpayer's turnover or GST liability are red flags.
• Compliance History: Previous compliance history, including tax and income tax, is a significant determinant.
• Timeliness and Compliance: Continued late lodgement, extension requests, late payment, etc., are key factors.
• Industry and Transactions: Industries with high levels of retail trade or cash transactions, as well as those involving complex and large transactions (e.g., property dealings, large CapEx), are at higher risk.
• Financial Record Deviations: Businesses with financial records that deviate from industry norms are likely targets.
• Misalignments in Records: Businesses where income tax and GST records do not seem to align are closely looked into.
• GST Refunds: The size and frequency of GST refunds also play a role in the ATO's selection process.

Peter further highlights the essential role of bookkeepers in the audit process.

"Bookkeepers can have a significant  impact on an audit's outcome,” said Peter. “Accurate financial records and timely compliance are critical in shaping a favourable audit result.”

As the focus on GST compliance sharpens, bookkeepers are now proactively gearing up to highlight the complexities of GST audits. Here are some key strategies they are adopting:

• Continuous Learning: Continuous learning is key, especially in this ever-evolving tax landscape. Staying updated with the latest GST regulations and audit processes is paramount for bookkeepers.
• Leveraging Technology: Leveraging technology is now more critical than ever. Utilising specialised accounting software and tools tailored to GST compliance can automate and streamline various aspects of the bookkeeping process, ensuring accurate and timely submissions, thus reducing the risk of audits.

How to meet audits with confidence

Even with proactive measures in place, audits can still happen. In addition to understanding the GST audit process, bookkeepers can adopt these good practices:

• Identify Problem Clients: Recognise clients with potential compliance issues and help them rectify their financial matters.
• Ensure Data Quality: Emphasise the importance of data quality and accuracy, encouraging clients to get it in order before lodging a Business Activity Statement (BAS).
• Utilise AI for Data Validation: Employ AI tools such as Dext and XBert to validate data integrity and accuracy.
• Emphasise Record-Keeping: Stress the significance of meticulous record-keeping, ensuring it aligns with industry norms and regulations.
• Understand ATO Charter: Familiarise yourself with the ATO Charter, understanding the obligations it places on ATO conduct.

By embracing best practices and leveraging technology, bookkeepers play a pivotal role ensuring a compliant and transparent financial landscape for businesses and taxpayers.

For comprehensive insights into managing GST audits, catch a recording of the recent episode on the ABN Bookkeeper’s Radio, available to members.