An ATO audit is one of the biggest concerns for Australian business owners — and as we move into 2026, compliance expectations are stricter than ever. Whether you run a small business, a growing company, or a sole trader operation, being prepared is the best way to minimise risk and avoid costly penalties.
The good news? Most ATO audits can be avoided with proper record-keeping, strong financial systems, and the right accounting support. This guest post outlines an easy-to-follow ATO Audit Checklist designed to help Perth businesses stay compliant and protected.
Why ATO Audits Are Increasing in 2026
The ATO has increased its data-matching capabilities, digital reporting requirements, and analytics technology. This means:
- More real-time monitoring
- Faster detection of errors
- Targeted audits for high-risk industries
- Automated comparisons of lodged data vs. bank feeds, BAS, STP and payroll
This makes accurate reporting more important than ever — especially for small businesses.
1. Keep High-Quality Financial Records
Poor record-keeping is one of the top reasons businesses get audited.
To stay protected, ensure you maintain:
(A) Complete invoices (issued and received)
(B) Bank statements & reconciliations
(C) Payroll & STP reports
(D) BAS/GST lodgements
(E) PAYG Withholding & Instalment summaries
(F) Asset purchase and depreciation records
(G) Stock and inventory records
Using cloud accounting software like Xero, MYOB or QuickBooks improves accuracy and reduces audit risk.
2. Ensure BAS and GST Are Lodged Accurately
The ATO regularly audits businesses with:
(A) Inconsistent GST claims
(B) Frequent amendments
(C) Late BAS lodgements
(D) Unusual spikes in credits
(E) Reporting that doesn't match bank activity
To reduce BAS audit risk:
(A) Reconcile accounts monthly
(B) Check GST codes
(C) Review expenses before claiming
(D) Work with a qualified BAS agent or GST specialist in Perth
3. Stay On Top of Payroll, PAYG & Super
Incorrect payroll is a major trigger for ATO audits in 2026.
Make sure your business:
- Sends STP reports on time
- Pays super before deadlines
- Calculates PAYG Withholding correctly
- Maintains timesheets and pay records
- Applies the correct awards and employment classifications
If your payroll is complicated, a payroll expert or business advisor in Perth can help you stay compliant.
4. Avoid Common Deduction Mistakes
Claiming incorrect deductions is one of the biggest red flags the ATO tracks.
Avoid:
- Private expenses claimed as business
- Large or unusual deductions without evidence
- Cash payments to staff
- Unreported business income
Always keep receipts and ensure your deductions align with ATO rules.
5. Conduct a Pre-Audit Review With Your Accountant
A pre-audit review is a proactive step to reduce risk.
Your accountant will check:
(A) GST & BAS accuracy
(B) Payroll & PAYG setup
(C) Income reporting
(D) Business structure
(E) ABN, GST and PAYG registrations
(F) Asset schedules & depreciation
(G) Financial statements for inconsistencies
This helps identify issues before the ATO does — saving you from penalties, interest charges, and stress.
6. Strengthen Your Cash Flow & Financial Systems
Businesses with messy financial systems or poor cash flow often attract more ATO attention.
A strong internal system includes:
- Automated bank feeds
- Accurate reconciliations
- Digital receipt storage
- Timely invoicing
- Budgeting & forecasting
- Director loan account monitoring
The more transparent your financial records, the lower your audit risk.
7. Choose the Right Business Structure
Sometimes audit risk increases simply because the business structure doesn’t match the size or operations of the business.
For example:
(A) A high-turnover sole trader
(B) A company with unnecessary complexity
(C) A trust structure without proper documentation
A business advisory expert in Perth can help assess whether your business structure is still right for 2026.
8. Lodge Everything on Time
The ATO closely monitors overdue:
- BAS lodgements
- Tax returns
- Superannuation payments
- TFN declarations
- STP reports
Being late frequently signals poor compliance — which increases audit risk. Always lodge on time or request an extension through your accountant.
9. Red Flags That Increase Your ATO Audit Risk
Your business is more likely to be audited if:
- You operate in a cash-heavy industry
- GST claims don’t match industry benchmarks
- You have large year-on-year revenue swings
- Your expenses look inflated compared to profit
- You report multiple years of losses
- You have frequent amendments
- You pay staff cash-in-hand
Being aware of these risk areas helps you stay ahead.
10. Work With an Experienced Accountant or Business Advisor
The easiest way to avoid an audit — and handle one smoothly — is to work with a registered, experienced accountant or BAS agent.
A qualified Perth accountant can:
- File BAS, GST, tax returns and payroll correctly
- Prepare audit-safe financial reports
- Review your deductions
- Ensure compliance with ATO rules
- Represent you if you’re selected for an audit
This gives your business peace of mind and strong protection.
Final Thoughts: Protect Your Business in 2026
An ATO audit doesn’t have to be stressful — if your business is well-prepared. By following this checklist, maintaining accurate records, and working with the right accounting professionals, you can significantly reduce your audit risk and keep your business compliant in 2026 and beyond.
For expert support with BAS, GST, bookkeeping, payroll, tax planning, and ATO audit preparation, the team at Palladium Financial Group is here to help Perth businesses stay safe and grow confidently.
