The Australian Taxation Office (ATO) is stepping up its efforts to ensure businesses comply with employment tax obligations through an intensive and comprehensive approach.
As part of its Random Enquiry Program (REP), previously applied to individual and business income tax returns, the ATO has now begun to target employment taxes including Pay As You Go (PAYG), Fringe Benefits Tax (FBT), and superannuation contributions.
This new strategy signifies a departure from the ATO’s previous focus. Unlike past audits, which were typically triggered by data mismatches or specific complaints, these random audits aim to review the entirety of a business’s employment tax obligations over a one-year period. This broad scope reflects a more aggressive stance by the ATO to address non-compliance and ensure proper record-keeping practices.
The REP, initiated in 2016 to identify the individual tax gap, has expanded to include small businesses and now employment taxes, signaling the ATO’s commitment to closing gaps across the board.
Businesses selected for audit are chosen at random, without regard to size or turnover, underscoring the comprehensive nature of this initiative. The ATO’s requests for documentation are extensive and designed to thoroughly assess compliance. With audits expected to take a minimum of two months, the process is resource-intensive, both for the ATO and the businesses under review.
For most businesses, total compliance with all tax obligations is unlikely, and many businesses tend to overlook aspects of employment tax, particularly FBT. The ATO penalty regime for non compliance is significant, with fines reaching up to $782,500 plus interest for significant global entities. Additionally, company directors could face personal liability for unpaid PAYG withholding and superannuation amounts under director penalty notices.
We are assisting some businesses with pre audit reviews, and also considering the appropriateness on tax audit insurance which covers the accounting fees associated with tax audits.
We encourage businesses to proactively review their employment tax practices, consider voluntary disclosures to mitigate potential penalties, and prepare for the possibility of an audit.
The ATO’s expanded use of random audits is a clear signal that employment tax compliance is under scrutiny. Businesses should take this development seriously, ensuring their records are accurate and that they are fully compliant with all employment tax obligations.
Contacts us for a Pre Audit review to protect your business.
