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Tax Audit Insurance: Learn what’s covered & compare policies with iSelect & BizCover
If you’re a business owner, then you’ve no doubt considered your company’s tax liability. An audit from the Australian Taxation Office (ATO) could cost your business thousands of dollars in accounting fees, not including any fines or penalties that may be administered by the ATO post-audit. Both factors can pose a financial risk to you and your business.
With tax audit insurance, can help provide coverage for accounting fees incurred if your business is audited by the ATO (subject to the terms of your policy). Keep reading to learn more about what Tax Audit insurance is, including how it works and what’s typically covered.
What is tax audit insurance?
When the ATO believes that there could be a discrepancy between your declared financial position and your actual financial position, you may be required to provide financial records for a certain time period or financial year.
Should a discrepancy be discovered, an audit can result in the ATO leveraging fines or additional taxes against your business, costing your business money that it could otherwise put towards operations, growth, and development1,2.
So if your accounts are audited by the Australian Tax Office, you may need to hire external accountants to assist in the process. Tax Audit Insurance helps cover a business for some specified costs in responding to an official tax audit*.
What does tax audit insurance generally cover you for?
Assistance from a professional can increase your chances of completing an audit with minimal burden. A tax agent or accountant will likely be able to help you locate and present your records in a more effective way, allowing you to better present your position during the auditing process. In this way, tax audit insurance can offer you more protection compared to responding to the ATO by yourself.
Fees that are typically covered* by tax audit insurance can include:
- Accountants’ fees
- Tax agents’ fees
- Other specified professional fees
What’s not typically covered by tax audit insurance?
It’s important to note that the following will likely not be covered by a Tax Audit policy if you are faced with a tax audit:
- Fines and taxes imposed
- Your time or salary or lost opportunities
- Your employees’ time or wages
Who can take out tax audit insurance?
In short, any business can potentially be audited by the ATO. Even if you’ve faithfully declared all your income, been conservative about your deductions, and filed on time, the risk of being audited is not unreasonable for a business owner.
In some cases, companies with completely clean tax records can be audited based on perceived irregularities between their tax returns, and the records provided by government agencies and financial institutions.
Regardless of your level of culpability, you’re bound to respond to the audit. This can be a lengthy, stressful and demanding process that consumes time, money, and energy that could be spent on your business. Finding, collating, and delivering these documents takes you and your staff away from your core business. Sometimes the ATO may ask for records stretching back several years, with supporting documentation often requested to substantiate claims for deductions and expenses1.
For these reasons, tax audit insurance could provide additional peace of mind, knowing that should your business be audited, you have cover to help pay for certain fees incurred in engaging an accountant or tax agent to assist you in responding.
Compare tax audit insurance with iSelect & BizCover today!
*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
^iSelect’s partnered with BizCover Pty Ltd (ABN 68 127 707 975: AFSL No.501769) to help you compare small business insurance policies. iSelect earns a commission from BizCover for every policy sold through the website or contact centre. iSelect and BizCover do not compare all providers in the market, or all policies offered by all providers. iSelect does not arrange policies from the providers we compare for you directly, but iSelect will refer you to our trusted partner, BizCover Pty Ltd who can.
Any advice provided on this website is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policy. You need to consider if the insurance policy is suitable for you. Please read the Financial Services Guide before buying any insurance policy.
Last updated: 18/12/2019