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Business Tax Tips – The importance of keeping proper records and evidence when the ATO comes calling

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Business Tax Tips - The importance of keeping proper records and evidence when the ATO comes calling

Business Tax Tips – The importance of keeping proper records and evidence when the ATO comes calling

Smart Company’s Terry Hayes reminds us of a key basic tax tip obligation of keeping proper records and evidence of the claims, when he summarises key results of an appeal against GST and income assessments –

A recent case in the Administrative Appeals Tribunal has again shown the importance of having proper records and evidence when the Australian Tax Office comes calling.

The taxpayer in question was audited and adjustments were made by the ATO. The taxpayer took the matter to the Tribunal but could not prove his case.

Read more: “Mice ate my tax records” just doesn’t cut it!

The AAT disallowed the taxpayer’s appeal against GST and default income tax assessments, although it set aside an administrative penalty for one of the years in question.

In 2008, the ATO audited the tax affairs of the taxpayer’s family and the companies they controlled. The family business in question was a business of property development and construction. The Tribunal said the audit “did not end well” for the taxpayer. As a result of the audit, the Commissioner was not satisfied that all of the taxpayer’s income had been disclosed nor that he had been carrying on an enterprise for GST purposes, which had the effect of calling into question the input tax credits he had claimed on his GST returns.

In 2012, the Commissioner made assessments of GST net amounts so as to claw back the input tax credits the taxpayer had claimed, plus default income tax assessments of the taxpayer’s taxable income for each of the income years 2003 to 2008 inclusive. The Commissioner had earlier made amended assessments for the income years 2007, 2009 and 2011.

The taxpayer faced tax and penalties of almost $2 million.

The taxpayer objected against the various assessments of tax and penalty. All of the objections relating to primary tax were disallowed, with the exception of one of the objections dealing with the 2007 income year, which was allowed in full. The objections relating to administrative penalty were disallowed, with the exception of the 2011 year, which was allowed in part.

The taxpayer then applied to the Tribunal for review of the Commissioner’s objection decisions.

The taxpayer was represented in the proceedings by his sister who, on his behalf, provided 55 lever-arch folders of documents to the Tribunal. Deputy President Frost of the AAT said it seemed that the taxpayer’s sister considered that those folders would shed light on her brother’s activities during the relevant period, including how he generated his income, what expenses he incurred in relation to those income-generating activities, what supplies he made for GST purposes and to whom, and what acquisitions he made and from whom, so as not only to attack the various assessments as wrong, but also to establish how they could be made right. The Tribunal, however, did not find the documents to be as helpful as hoped by the taxpayer.

The taxpayer himself did not provide a written statement to the Tribunal to explain his activities during the relevant periods or the sources of his income, and he did not give oral evidence either.

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Author: Account keeping plus (Business accounting software

Administration, Bookkeeping and Compliance for small business, and Self-Managed Super Funds (SMSF) Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, Free support 30 min call 0407 361 596 Australia (+61 drop 0 from overseas) MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

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