Consistency between Income Tax and Business Activity Statements (BAS)

The Australian Taxation Office uses various statistical methods to decide upon reviews/audits of taxpayers.

One method is to compare the classifications given by taxpayers on their BAS return for taxable supplies, exempt supplies, capital acquisitions and other acquisitions, as well as many others.

A recent case highlighted a minor error in classifications in a BAS return of capital expenditure under the category of other acquisitions.  This return was prepared by the taxpayer.  When the income tax return was prepared by the tax agent, the expenditure was correctly identified as capital and appropriately depreciated.  However, the discrepancy in classification which had no GST impact nor any income tax impact was identified during the audit as the reason for the examination.

An apparently inconsequential in mistake by the taxpayer became time consuming costly exercise, which in the end resulted in no changes.

An effort to save costs by the taxpayer preparing their own BAS return, can be avoided by allowing the tax agent to prepare and lodge or review and lodge or review, subject to accepting the tax agents instructions.

Working together throughout the year is a small investment in “preventative maintenance”. 

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