Back to the 80s: A changed approach by the ATO means the tax man could be auditing in your office soon

The Australian Tax Office is set to conduct audit programs where officers set up temporarily at the premises of small and medium enterprises, in a change of approach for the Tax Office.

A spokesperson for the ATO told SmartCompany the streamlined audit program commenced 1 August 2012 as part of the Tax Office’s compliance program for the coming year.

“These audits are part of a suit of review products that are used in the SME market,” the spokesperson said.

“The aim of the small and medium audits is to reduce the overall burden on small business and ensure that we are engaging directly with business taxpayers and their advisors to help us gain a better understanding of their commercial operations.

The spokesperson said the ATO will work with the business operator and their advisors to arrange suitable times and dates for the visits and will clearly advise the scope of the audit. 

“Our first contact will be by phone to arrange an initial interview time. We will send written confirmation of the agreed interview details and a list of the records that we need for the interview,” says the spokesperson.  

“To date, on average, on-site visit last about five hours.

“Of course, we may ask the business to give us a walk through of their operations and ask for a place to work during the visit.”

The Australian Financial Review reports this workplace needs to include table and chairs and access to a photocopier.

CPA Australia head of policy Paul Drum told SmartCompany the ATO’s return to actual office visits was “very interesting” and harked back to its approach 30 years ago.

“It’s a slightly different approach, but it’s not something that’s new. It’s what I’d call the traditional tax office approach; the access powers give them full and free access any time, so it’s not a change in authority,” he says.

“This would be typical of what the ATO did in the 80s and 90s but over the last decade there has been an effort to switch to more technologically advanced audits like data matching.

“It is a bit of a pendulum swinging back to doing a bit more leg work.”

Drum says as the emphasis on using technology to conduct audits increased, less effort went into face-to-face visits.

“They lost that presence in the market which I don’t think is necessarily a good thing in a system based on voluntary compliance,” he says.

Drum says the ATO’s in-office appearances never ceased completely but it appears there might be more of them in the future.

“The ATO has always had a balanced approach between face-to-face going into a business and the data matching approach,” he says.

“Many accountants have said they have not seen an auditor for years and, for the integrity of the system that is based on voluntary compliance, there is a lot more value of businesses seeing more of the tax office in this regard.”

Despite the policy reasoning behind face-to-face audits, Drum concedes some businesses might not like having the tax man setting up shop in their office.

“It’s not going to be what businesses desire or want and it can be a bug bear and can be costly,” he says.

“The extent to which they are going to sit in is of interest, particularly if it is disruptive to businesses.”

Drum says he hopes the ATO will negotiate its access with businesses so they can be prepared and the visit does not occur at the busiest times of the year.

“The ATO is allowed full and free access at any time, so it’s not going to be like a raid. We expect there will be warning,” he says.

“They will be guided by the ATO charter to treat people honestly and with respect.”