Editorial from The Northern Star & The Advocate Newpapers on the 22/03/2011

The tax office audit program has recently been ramped up with “business benchmarking” being their latest audit tool. This audit technique involves applying a “typical business” test and using the inputs into the business to determine the likely income that the business should be making.

For example, a typical painting business has a benchmarked material cost equal to 25% of sales, so if paint purchases were $100,000, then it should have an income of around $400,000. If the declared income is substantially different from this then an audit please explain letter has been issued.

This approach is rather a blunt instrument as business operations vary substantially between firms within the same industry depending upon their target market, business size and pricing policies. What this audit technique does highlight is the need to be able to explain why your business is different and that you need good accounting records to be able to support your explanation and financial figures.

Data matching by the tax office is also increasing in sophistication and breadth every year with millions of transactions reviewed by the tax office last year. Office of State Revenue records which record property transactions, vehicle and business sales and business levies is just one source of information that they have been using.

For advice on how your business compares to the tax office audit benchmarks, please call Enright Tax Accountants today on 6686 4744 or visit our website at www.enright.com.au for more information on our practice and the services we offer.

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Editorial from The Northern Star & The Advocate Newpapers on the 01/09/2010

To maximise your personal tax refund you need to maximise all your tax-deductible expenses and personal tax offsets which typically include:

§         Private motor vehicle used to attend seminars, training sessions, to carry bulky work goods, drive between two work sites on the same day and using your vehicle within your work. The deduction is based upon the total number of work related kilometres travelled during the year, subject to a 5,000 km maximum and the engine size of your vehicle.

§         Purchase of uniforms and protective clothing and footwear

§         Laundry and repairing of the above clothes

§         Sunglasses, hats and sun lotions for outdoor workers

§         Union fees and memberships to work associations

§         Mobile and home telephone expenses

§         Internet used for work related purposes

§         Educational activities undertaken that relate directly to your current employment

§         Electricity for the home office

§         Purchase of tools and equipment

§         Stationary, diaries, calculators and log books

§         Computers used for work can be depreciated 

§         Computer related expenses such as paper and ink, software and computer repairs

§         Gifts to registered charities and political parties

§         Tax agent fees paid last year to prepare your return

§         Medical expenses over $1,500

§         Children’s educational expenses

This year the tax office has indicated that it will be targeting high claiming taxpayers and taxpayers who fall outside their relevant occupation benchmarked expense ratio, so it is essential that correct and complete records are kept to verify these claims in the advent of an audit.