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A business tax health check is a similar idea to a regular medical checkup with your doctor only it is a health check of your business’s tax affairs. It is a review of your business’s records and accounting systems with a view to:

  • identify any areas of risk in relation to the collation or recording and reporting of data used to produce reports to any Government revenue office;
  • identify opportunities that have not been taken advantage of – for example incorrect reporting or not utilising alternatives available through the tax system leading to too much tax being paid;
  • Giving confidence in the level of risk the business has in relation to taxation

Why have a Business Tax Health Check?

Tax Audit Risk

Various Government revenue offices, particularly the ATO and Offices of State Revenue have been increasing the number of reviews and audits of businesses to ensure that they are compliant and paying the correct amount of tax.

Furthermore, the ATO has foreshadowed concerns that during times of economic downturn, certain people may seek an unfair advantage by avoiding their tax obligations. Accordingly, compliance reviews to ensure taxpayers’ obligations are met are increasing. The ATO’s data matching capabilities are also becoming increasingly more sophisticated.

We are also noticing an increasing level of audits from State Revenue Offices, especially in the area of payroll tax.

All Government departments are forecasting budget deficits and gaining revenue through increased audit activity is one way to help reduce these deficits.

Depending upon the Government department, the type of audit / review and the outcome, non-deductible penalties can range from 5% up to 75% and interest on late payment of tax can be up to 15%. Possibly worse than the penalties and interest is the lost time having to deal with the audit when you should be making money working on your business.

Accordingly, businesses should be prepared for an audit or review and key decision makers should be confident that their systems, policies and procedures will stand up to the scrutiny of the revenue authorities.

Is your business ready for a tax audit?

Corporate Governance – Tax Risk

Large companies will generally have a corporate governance policy. These policies discuss how the company is directed and the level of risk that the board of directors is comfortable with across all areas of the business. The corporate governance policy should address the subject of tax risk – it should review the company’s attitude towards tax and the policies in place to ensure that the company is run in line with that attitude.

While the concept of corporate governance is relevant and readily understood by large companies, it is equally relevant to smaller businesses. By definition, small to medium enterprises do not have as much capital or cash flow as large businesses, so they need to be especially cautious around tax risk as the cost of getting things wrong can have a larger impact on these businesses. Not only can the cost of an adverse audit outcome impact a business’s cash flow, the cost of missing out on tax saving opportunities can have a similar impact. Therefore it is imperative  that business owners are aware of any tax risks or missed tax opportunities and have procedures to adequately deal with them.

The Hanrick Curran Solution – Business Tax Health Check

Our business tax health check will provide the business owner or key decision maker with confidence that they are aware of the tax risks associated with the business and allow them to take steps to mitigate or manage these risks to a satisfactory level.

The business tax health check involves  a high level review of the policies  and procedures currently in place around your business’s financial reporting system that ultimately produces information which is provided to revenue authorities.

A report will be produced analysing the areas reviewed and highlighting any areas of concern along with a suggested solution where appropriate. We would meet with the key decision maker following our report to discuss the areas highlighted to ensure they understand the risks involved and what can be done to mitigate them.

As this is a high level review, if one or more areas are identified as having a particularly high level of risk, a more detailed review may be appropriate in relation to that particular area.

Areas reviewed can include:

  • Income Tax
    • Structure
    • General approach to income tax
    • Record keeping
  • Assets (correct recording, correct tax write-off)
  • Fringe Benefits Tax and Salary Packaging
  • Goods & Services Tax
  • Payroll Tax
  • Work Cover
  • Superannuation Guarantee
  • Other

While we recommend a comprehensive review addressing all of the above areas, a more focused review specific to one or two areas could be tailored to your particular requirements.

Should you have any queries or would like further information, please speak with your usual Hanrick Curran adviser or call Jamie Towers Tax Consulting Partner on 07 3218 3900.