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Tax Audit

Florists – don’t get caught out by the Tax Office

Did you know that the Australian Taxation Office (ATO) uses what is called a “benchmark” when deciding whether or not to audit a business. ATO computers automatically generate a list of all taxpayers who do not meet the benchmark. There is a strong possibility that these taxpayers will be audited.

These are the average floral benchmark figures for 2014.

Turnover: 65,000-$300,000 $300,000-$600,000 More than 600,000
Average cost of sales 47% 48% 49%
Average total expenses 84% 88% 90%

 

Thus, if you take a husband and wife partnership who run a florist with a $1 million dollar turnover, the ATO considers that the average total expense is approximately $900,000. This means that the business has approximately $100,000 income. Thus, the husband and wife should be declaring approximately $50,000 each. Don’t forget this is only an average.

A florist not coming within the benchmark is more likely than most to be audited.

So the message is, be prepared:

  1. Keep all receipts of your purchases. This is particularly difficult for florists who buy directly at market who are under tight time pressures and when there is no time to collect receipts. The ATO will accept handwritten or typed notes that you prepare directly after you buy the flowers. This can be on the way home from markets or as soon as you get back from markets. These days you can use a smart phone to dictate what you have bought and then transcribe it later.
  2. Make sure your daily takings are recorded either in a system like MYOB, or a notebook. It doesn’t have to be sophisticated as long as you and the taxman can understand it.
  3. Make sure all your staff are on the books – it is simply not worth it not to have your staff on the books. And all wages and superannuation is a deduction to the business.

If you are audited, you should engage an experienced tax lawyer who can help negotiations with the Tax Office.

As the former owner of Kavelle Flowers in Sydney, and now the owner at Waterhouse Lawyers, Tania Waterhouse understands better than most the problems faced by florists in maintaining proper taxation records. Tania also has strong connections with the Tax Office and uses these to achieve the best possible result for you. Tania has an excellent track record – she has been achieving outstanding results for her clients who have been audited.

 

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