More audits are occurring.  Some because BAS and tax returns are late, and some because key numbers in the financials fall outside 'expected' benchmarks.

This year, we will use new software to compare actual financials to ATO benchmarks, and can hopefully fix any problem before one arises, or at least be able to explain the difference if required.

Here are some tips on managing the audit process:

- If you are selected, tell us early so we can obtain from the ATO a clear scope of the areas to be reviewed.

- Don't rush to set the date for the ATO.  You are entitled to agree a date that fits with your business needs - within reason.

- Allow sufficient time to review the records for the audit area and to ensure there are no issues or problems.

- Be prepared, have the files and documents requested ready.

- During the audit, stick to the issues at hand.  Don't ramble or open up other issues, answer the questions and move on.

- Expect questions like 'could we see the vehicle log books', to explain your accounting system and whether it is regularly reconciled, 'how's trading' and to explain why there are differences from ATO benchmarks, sight choice of super forms, whether ABN/individual contractors are used and has super been paid for them, were trust distributions minuted before 30 June, etc.

- If a problem is found, consider making a voluntary disclosure.  It will not save the tax but will mitigate penalties.

- Accept that the ATO auditors are doing their job.  Don't challenge them except on issues of law or fact.

- Finally, use an advisor with experience in tax audits.  Yes, it has a cost but the pre-planning and attendance should protect your interests, assist the efficiency of the process, and hopefully get it over faster.

There was more money in the 2013 Budget for more data matching by the ATO and this should surely lead to more audits.  Knowing how to manage them should protect you from the downside.

These are a few of the ways we hopefully prevent audits now:

- outside audit of super funds; no audits to date, one case of non-compliance resolved early

- checking against benchmarks for key areas; no audits, several cases of non-matching explained before audit required

- warnings on maintaining log books for cars, use of sub-contractors and superannuation, reconciliation of MYOB/Quicken accounts, keeping of records, etc.

- end of year reviews, minutes of trust distribution of profits before 30 June

- careful preparation of the ATO returns to correctly disclose  information required

We have not perceived any real benefits to clients from Audit Insurance to date.  However, as audits are more frequent and often much wider scope, we are looking at this again as a way of reducing your costs, and will address this in the near future.