EVERY now and then, I come across situations that contain so many lessons for so many people, and I am compelled to share one particular situation with you that arose last week. A potential new client approached me to help sort out her taxation affairs.
Obviously, confidentiality limits the amount of detail I can provide in this forum - but suffice to say, many years of income tax returns had not been lodged. Business records had been lost and the ATO was showing some interest.
My first question was, "Who the $%^& have you been dealing with?!"
This brings me to lesson 1 - who have you been dealing with?
This taxpayer had entrusted her financial affairs to someone who, as far as I can determine, has no standing with the ATO or professional body. This, of course, sounded some alarm bells for me, and subsequent events have reinforced my initial concerns.
Anybody offering taxation advice or assistance needs to be authorised by the ATO - if you are in any doubt, you can check by going to www.tpb.gov.au, where you will find a list of authorised tax agents (including Allan C Johnson!).
Lesson 2 - Make sure your tax affairs are dealt with
With Australian tax laws being as complex as they are, I can understand how some taxpayers need to rely on the services of qualified professionals. However, there are simple things that can be done to make sure everything is up to date.
You should have in your records a copy of a Notice of Assessment for every tax return lodged, and requesting a copy of your income tax accounts from the ATO is also a reasonable precaution. Clearly in this case, the client allowed the situation to deteriorate for far too long before taking action. What would have been a nuisance is now a bit of a disaster!
Lesson 3 - Make sure you maintain your own records.
However you maintain records for your business (or even your personal affairs), you should make sure that you retain copies of records that are essential to explaining your tax affairs. Whether it is a backup of your computer files, Word documents etc., or photocopies of documents, maintaining these records in case they are needed is always a wise practice. In this case, supporting records are nowhere to be found - and you know what they say…the memory is the first thing to go!
The lesson to be learned is to know who you are trusting with your financial affairs - it's a big responsibility and one that can't be taken lightly! Always have a backup position and don't put your head in the sand when it comes to the taxation department. If your taxation affairs are falling behind, do something about it NOW before another financial year rolls around.