How to Prepare Your Business for an ATO Audit (and Reduce the Risk of One)

ATO audits are becoming more common, particularly for small and medium businesses. In 2025, the Australian Taxation Office (ATO) has stepped up its compliance activity with more funding and resources, which means greater scrutiny of business records and lodgements. For business owners, the thought of an audit can feel daunting, but with the right preparation you can reduce your risk and approach the process with confidence.

Quick Summary

• ATO audits are on the rise and are targeting small and medium businesses in 2025.
• Common triggers include GST mismatches, unusual deductions, late lodgements, and payroll issues.
• Strong record-keeping and timely reporting are the best ways to minimise risk.
• Professional advice and regular compliance checks help keep your business safe.
• Origin BC supports businesses with audit preparation, representation, and compliance management.

Why Businesses Are Facing More ATO Audits

The ATO is focusing heavily on compliance this year and is directing more resources toward reviews and audits. Small and medium enterprises are a particular focus, given their scale and contribution to the economy. Key areas of scrutiny include GST reporting, the cash economy, international transactions, and businesses that consistently lodge returns late. Penalties for missed deadlines are becoming more common, and industries such as hospitality, retail, and trades are being watched closely for under-reported income.

For many business owners, the idea of an audit raises questions about whether records are complete or whether deductions have been claimed correctly. The good news is that an audit does not have to disrupt your operations. With the right systems in place and the right support, you can show compliance with confidence and reduce the likelihood of being flagged in the first place.

Common ATO Audit Triggers for Businesses

The ATO rarely selects businesses at random. Instead, it looks for warning signs that suggest errors or inconsistencies. Some of the most common triggers include:

• GST mismatches where reported income does not line up with figures in your BAS. Consistently accurate BAS lodgement helps you avoid this issue.
• Expense claims that are unusually high compared to industry averages, particularly for motor vehicles, travel, or home office deductions.
• Late or missing lodgements for BAS, PAYG, or annual returns. Staying on top of obligations with systems that support lodging your business tax return is essential.
• Cash-heavy industries such as hospitality, retail, and trades, where under-reporting can be harder to detect.
• International transactions or related-party dealings, which attract closer inspection if they appear complex or tax-driven.
• Payroll irregularities, including missed superannuation payments or PAYG withholding errors. Regular checks and accurate reporting through payroll services reduce this risk.

Understanding these triggers allows you to avoid unnecessary red flags and operate with confidence.

How to Prepare and Reduce Audit Risk

Preparation is your strongest defence against an audit. By building reliable systems and maintaining accurate records, you create a clear, transparent trail that demonstrates compliance.

• Keep records organised — invoices, receipts, payroll reports, and bank statements should be stored systematically, with digital copies where possible.
• Use reliable accounting software — platforms like Xero and MYOB reduce manual errors and offer automated reconciliation features.
• Review financials regularly — working with your accountant to review financial statements and tax returns ensures your numbers are consistent and accurate.
• Lodge on time, every time — delays in BAS, PAYG, or annual returns can quickly lead to ATO scrutiny. Our guide on how to lodge a business tax return provides practical steps.
• Plan strategically — regular tax planning reviews mean you can maximise deductions without triggering concerns.
• Review your business structure — an outdated setup can create inefficiencies and risks. Our advice on business structures in Australia helps you identify the most effective approach.

By taking these steps, you are not only prepared for a potential audit, you are actively reducing the chances of being selected for one.

How Origin BC Supports You Through an ATO Audit

If your business is selected for an audit, you do not need to face it alone. Origin BC provides expert guidance and direct representation to make the process as smooth as possible. We assist by:

• Preparing and reviewing records so they meet ATO requirements.
• Handling all communication with the ATO on your behalf, supported by our experience in ATO tax debt negotiation.
• Monitoring compliance through ongoing accounting and tax services, helping prevent future issues.
• Developing proactive strategies with tailored tax planning advice to keep your claims legitimate and defensible.
• Providing ongoing business support, from bookkeeping and CFO services to business tax return services.

With decades of combined experience, we give you clarity, compliance, and confidence through every stage of the process.

Contact Origin BC today to safeguard your business against ATO audits and get the peace of mind that comes from having experts in your corner.

Disclaimer: This article provides general information only and does not constitute financial or tax advice. You should not act on the basis of this information without obtaining professional advice that is tailored to your circumstances. Origin BC accepts no responsibility for loss occasioned to any person acting or refraining from action as a result of material contained in this publication.