Preparing for an Indirect Tax review requires careful planning and organisation. Indirect taxes in Australia primarily revolve around the Goods and Services Tax (GST) but can also encompass other taxes such as Fuel Tax Credits (FTCs) and the Luxury Car Tax.
Here are some steps a company should consider in preparation for an Indirect Tax review:
- Understanding the Scope: Ascertain the specifics of what the ATO will be reviewing. This can be GST, FTCs, or any other indirect tax obligations. Knowing the exact focus will help streamline the preparation process.
2. Compile Relevant Documentation: Ensure all records, invoices, and receipts related to indirect tax transactions for the review period are readily available. This can include:
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- Business Activity Statements (BAS) and any relevant supporting calculations.
- Sales and purchase invoices.
- Records of all input tax credit claims.
- Contracts and agreements.
- Electronic transaction records.
3. Review GST Reconciliation: Ensure that the GST collected and paid matches the amounts reported in your BAS for the period under review.
4. Check GST Treatments: Ensure you’ve applied the correct GST treatment to all your transactions, especially in cases where the GST rules might be complex or ambiguous.
5. Re-examine Input Tax Credits: Ensure that you’ve only claimed credits on business-related expenses and have the necessary documentation to support these claims.
6. Review Special Schemes: If you’ve used any special GST accounting methods or schemes, such as the margin scheme for property transactions, ensure that these have been correctly applied and documented.
7. Internal Review: Consider conducting an internal review before the official ATO review to identify and rectify any discrepancies in your records.
8. Engage a Tax Specialist: Consider engaging a tax consultant or specialist familiar with Australian indirect tax to review your records, provide advice, and assist in the review process.
9. Know Your Rights: Familiarise yourself with the rights and obligations of taxpayers during a review. This includes understanding how to request a private ruling or object to an ATO decision.
10. Open Communication: Maintain a cordial and transparent relationship with the ATO representatives. Address any concerns or queries promptly.
11. Prepare a Central Point of Contact: Designate a person within the company (or an external advisor) to be the primary contact for the ATO. This ensures consistent communication and minimises misunderstandings.
12. Documentation and Note-taking: Keep detailed notes of all communications and meetings with the ATO. This can be crucial for any future discussions or disagreements.
13. Seek Clarification: If you’re unsure about any requests or queries from the ATO, seek clarification rather than making assumptions.
14. Stay Updated with Legislation: Ensure that you’re up to date with any changes in the indirect tax legislation that might impact your review period.
15. Ensure Future Compliance: Use the review as an opportunity to identify areas of improvement in your current tax procedures and make the necessary changes to ensure future compliance.
Remember, the primary goal of the ATO in conducting reviews is to ensure the taxpayer is paying the right amount of tax. Being prepared, organised, and transparent can make the review process smoother and more efficient.
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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