Assistance with investigations/prosecutions and dealing with the ATO
In practical terms, investigations by the Australian Taxation Office (ATO) will be generally handled by your accountants. However the ATO is not above the law.
Just because their office has adopted a policy that a particular type of transaction will be treated in a certain way so far as tax is concerned does not mean that they are right. There are any number of cases where the courts have not agreed with the view put forward by the ATO.
If a business simply fails to disclose income or understates the income and it is caught out, there is little we can do other than appear in court and draw to the court's attention matters such as the firm's prior good record as a taxpayer.
If, however, the ATO disagrees with your accountant as to the taxation consequences of what you have done then it is worth taking legal advice. Your accountant may be right. It may be worth pursuing the matter in court, depending upon the amount involved.
It is not unusual for such disputes to be settled out of court on a compromise basis by the ATO. From time to time it has become apparent that the office is keen to resolve matters because it has a backlog of disputes.
Conducting a tax audit
You don't have to wait until the ATO walks in the door to conduct a tax audit. If you are uncertain as to the correct tax consequences of a certain action or proposed action, you can apply to the ATO in advance for a ruling. As long as you provide accurate and complete information to the ATO, that ruling will be binding on them.This is not a step which should be taken too lightly. There is significant cost in preparing an application for a ruling. There is always delay at the ATO as the original processing officer and his or her superiors consider the matter and there are likely to be requests for additional information which causes additional delay and cost. However, in an appropriate case, the ability to obtain a ruling can be of enormous value. The right ruling may save you a lot of tax and enable you to sleep more soundly than would otherwise be the case.
The same principles apply so far as the NSW Office of State Revenue (OSR) is concerned regarding stamp duty.
At Stacks/The Law Firm, our approach to these matters is to combine expertise with common sense so that you can make the decision which is best for you and your business, and so that you don't spend more in legal fees than is sensible having regard to the amount of tax or potential tax involved.