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Alarm Bells That Could Trigger a Tax Audit

Updated on September 24, 2018
Priscah Williams profile image

Priscah is a registered tax compliance officer in Sydney. She has 15 years of experience in tax issues among enterprises.

Ever wondered why some tax returns get special attention from the Australian Taxation Office (ATO) while others pass by ‘unnoticed?’ Well, over the past few years there has been a marked increase in the number of tax audit investigations the ATO is undertaking. However, with the percentage of audits vis-a-vis the total number of returns being about 1%, it is highly unlikely that you will be picked out for a review. You may still do everything needed, and yet get audited. Well, unless you’re fudging with your returns, there is no cause for worry. While it may be down to a random pick, certain red flags will draw the attention of the ATO to your enterprise.

Performances that are not in line with benchmarks

The ATO has extensive statistics of businesses in Australia. Following repeated and thorough analysis of various industries, they have devised benchmarks with regards to revenues and the ratio of expenses for multiple industries. Once you’ve filed your returns, they are cross-referenced against the databases. Returns that are inconsistent with those of other industry players is often indicative of tax discrepancies and is sure to lure in ATO auditors.


It will often occur when there are disgruntled employees – present or former. The ATO is always prompt and on hand to investigate claims by employees especially on their superannuation. Sometimes, what starts as a simple superannuation investigation spills over to Income Tax as well as Goods and Services Tax (GST). Unhappy suppliers may also spell trouble.

Generally Being a Nuisance

If you are continually lodging your returns late, then you’re inviting auditors. Also, reporting constant unusual fluctuations of your business’ performance, failing to file Fringe Benefits Tax returns yet you own company vehicles are all going to lead to an audit.

Overseas Transactions

The ATO analyses your transactions with overseas individuals or institutions. Transfer of funds or transactions with firms in locations generally considered to be tax havens is sure to have you on the auditing list.

It is imperative that you always be on top of your tax compliance game.

© 2018 Priscah Williams


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