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ATO – What attracts our audit attention

To help you taxpayers get things right, you should consider the behaviours, characteristics and tax issues that may attract the audit attention of the ATO.  The Australian Taxation Office have published this information below as part of their commitment to transparency in working with privately owned and wealthy groups.

Broadly, the following behaviours and characteristics may attract the ATO’s attention:

  • tax or economic performance is not comparable to similar businesses
  • low transparency of your tax affairs
  • large, one-off or unusual transactions, including transfer or shifting of wealth
  • a history of aggressive tax planning
  • tax outcomes inconsistent with the intent of tax law
  • choosing not to comply or regularly taking controversial interpretations of the law
  • lifestyle not supported by after-tax income
  • accessing business assets for tax-free private use
  • poor governance and risk-management systems

There are specific behaviours and characteristics that attract the ATO’s attention, including:

Division 7A – Deemed Dividend

The use of company funds or assets for private use by shareholders or their associates may result in a deemed dividend under Division 7A for the shareholder or their associate.

A deemed dividend may occur when a company pays, lends or forgives a debt to a shareholder or associate.  These amounts should be included in the assessable income of the shareholder or their associate.

What attracts the ATO’s attention:

  • Amounts are taken from a company and are not repaid.
  • A complying loan agreement has not been put in place.
  • Minimum yearly repayments are not made.
  • Where interest income is not declared on the company tax return.
  • The private use of a company asset.
  • Attempts to avoid application of Division 7A to transactions between a private company and a shareholder or their associate.

Directors loans

The ATO focuses on profits extracted from a private company by shareholders or their associates and whether they are taxed correctly.

The ATO examines the directors and shareholders of private companies who report low levels of salary and wages and no other sources of income. This examination looks to identify shareholders extracting wealth and maintaining a lifestyle that cannot be supported by the level of income reported on their tax return.

What attracts the ATO’s attention:

  • Companies that do not disclose any shareholder loans on their tax return.
  • Directors who do not report taxable remuneration such as salary and wages or directors fees on their tax returns.

Our services

In the preparation of financial statements and income tax returns, Griffin & Associates carefully considers the income tax legislation to ensure clients are not exposed to ATO audit activities.  Click here for more details on the services provided by our office.


Griffin & Associates

79 Denham St, Townsville City QLD 4810

Phone 07 4772 6588

Chartered Accountants