An ATO Indirect Tax review focuses on the indirect tax liabilities of businesses, mainly the Goods and Services Tax (GST), but it can also include other taxes such as the Wine Equalisation Tax (WET), Luxury Car Tax (LCT), and Fuel Tax Credits (FTC).
The potential consequences of an ATO Indirect Tax review can include:
Additional Tax Liability: If the review finds any discrepancies or undeclared liabilities, the business might be liable for the additional tax amount.
Penalties and Interest: If the ATO determines that there was a failure to declare or pay the correct amount of tax due to negligence or intent, then administrative penalties can be imposed. General Interest Charges (GIC) can also accrue on any unpaid amounts from the time they were originally due.
Increased Scrutiny in the Future: Businesses that have been reviewed and found to have discrepancies might be subjected to more frequent or rigorous reviews in the future.
Cost of Compliance: The process of undergoing a review can be time-consuming and may require the business to engage tax professionals to assist in providing the necessary documentation and explanations. This can lead to additional costs.
Reputational Impact: Being subject to an ATO review, especially if there are adverse findings, might affect the reputation of the business, potentially leading to a loss of customer trust or business partnerships.
Operational Disruptions: Reviews can be disruptive to the day-to-day operations of a business. Staff may need to spend considerable time gathering records and information, which can divert resources from other core business activities.
Payment Arrangements: If a business is unable to pay the additional tax liability and penalties in a lump sum, the ATO may allow for a payment arrangement, wherein the business can pay the amount owed over a period of time.
Legal Proceedings: In extreme cases where there is evidence of intentional tax evasion or fraud, the ATO might initiate legal proceedings against the business or its directors.
It’s essential for businesses to be proactive in their tax compliance, maintain accurate records, and seek advice from tax professionals to ensure they are meeting their obligations. Being transparent and cooperative during a review can also help in building a positive relationship with the ATO and potentially reduce adverse outcomes.
BTG can help.
BTG International has helped some of the worlds most respected companies prepare for and/or manage an Indirect Tax review. Call us on 1300 650 258, email contact@btgi.com.au or leave your details and we will be in touch.
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