If you’re not keeping proper records, or well organised in your business or tax records, you could be in for a rude shock …
Basically, you’re GUILTY until proven INNOCENT.
So, if you cannot show clearly the Tax Office was wrong in working out your tax, and have clear records to back yourself up, you will end up paying a lot more tax. And will lose in court.
This is now clear from a recent tribunal case.
In a nutshell, the business owner was unable to back up his BAS statements where he claimed GST credits, or his deductions he claimed for tax purposes. His sister walked in with lever arch files, but these weren’t considered good enough because they didn’t explain.
So for example, some money he invested into his business was held to be income because he couldn’t show it was anything other than income, ie. it was simply savings or a loan.
The moral of the story?
Be well organised in your business!
I have a system where I scan receipts on my phone, which go into a dropbox folder, and I have my bookkeeper linked to that folder who organises. So all my receipts are scanned and organised, with excel spreadsheets, and can easily be explained.
Here is an article to know the importance of tax records.
Contact us at Wealth Safe if you’d like some help protecting your business and ensuring it is ATO-AUDIT Proof.