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The ATO is going after small businesses

The ATO has always picked random businesses and checked that their books are true and honest, and just recently, they have announced they will go after those with little care to their reports.

The ATO now has advanced systems to track people’s lifestyles and compare them to what they declare. So, guess what, unjustified expenses such as “business trips” or lunches at expensive restaurants claimed as “business meetings”, if caught, must be justified. Business owners must be very careful about how they spend their money, and if business-related, they have to be prepared to justify the expense.

Some tips to be always compliant and avoid mistakes (and, don’t get me wrong, I believe that those who keep their books and are little educated about it, might make honest mistakes, however, the Australian Taxation Office does not care):

  • use your business bank account only for business-related expenses.
  • be careful about what you reimburse yourself for and make sure you ALWAYS have/keep the receipts.
  • if unsure, ask your bookkeeper/accountant, that is why we exist!
  • do not trust accounting software just because they have ‘default’ settings, for example, a ‘rule’ in your accounting software might recognise an expense that is an ‘owner’s drawings’ type of thing, and it must be excluded from your P&L Report.

The ATO is focusing especially on those ‘travel claims’, so, if you go on a business trip, make sure your non-business-related expenses are not claimed in your books.

Do you have any questions? Post them in the comment below!

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