Tax Audit Insurance
Tax Audit Insurance
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What is tax audit insurance?
Whether you leave your business finances to a tax accountant or you take responsibility for your own taxes, as a business owner, you’re required to regularly declare your financials to the ATO.
There might be times when the ATO suspects there’s a discrepancy between your declared financial position and your actual financial position. To clear your business’ name, you might have to disclose your financial records over a certain time period or financial year as part of a tax audit. If the ATO does discover a discrepancy, your business could be slapped with interest charges or penalties.
If you find yourself in this sticky situation, you might need to enlist the assistance of professionals to help you navigate the audit process. While this can be an expensive exercise in itself, many business owners don’t consider the time and stress that also come with these audits. This is where tax audit insurance can come in handy.
Tax audit insurance is designed to cover businesses for some costs if they’re selected for auditing by the ATO or other relevant authorities. Most policies cover the professional fees incurred over the course of an audit, including accountants, tax agents, and other tax professionals.
What does tax audit insurance generally cover you for?
Most tax audit insurance policies will cover you for several different types of taxes. Not to mention, you’ll typically have cover for:
- accountants’ fees
- tax agents’ fees
- some other professionals’ fees
What’s not typically covered by tax audit insurance?
While tax audit insurance can help cover some of the costs that come with an ATO audit, there are often a few key expenses that aren’t covered, such as:
- interest charges, penalties and fines for non-compliance
- your time, salary or missed work opportunities
- your employees’ time or wages
Remember, each tax audit insurance policy is different, so be sure to refer to the product disclosure statement (PDS) or policy wording to understand the inclusions and exclusions of your specific policy.
With insurance | Without insurance |
What mistakes can cause businesses to get audited?
When it comes to filing your taxes at the end of the financial year, it can be easy to make mistakes. Even with the help of a tax professional, it’s essential to review your financial documents with a fine-tooth comb to make sure everything stacks up.
These days, the ATO is even using advanced data-matching techniques to pick up differences between tax returns and information from other government agencies and organisations, like health insurance providers and banks.
Some of the most common slip-ups that small businesses make include:
- mistakes due to poor record-keeping
- not reporting all sources of income
- overlooking the private use of business assets or funds
- errors due to misunderstanding their tax responsibilities
While most business owners do their best to report their figures correctly, these simple mistakes can be enough to attract the attention of the ATO, leading to a tax audit.
Helpful tip from BizCover
As a business owner, chances are you want to invest as much cash, time, and brainpower as possible into your business to ensure its success. A tax audit could really throw a spanner in the works. Without tax audit insurance, you could be left to cover the cost of hiring professionals out of your own pocket.
Compare tax audit insurance with iSelect and BizCover today!
Accountants and tax professionals charge a pretty penny for their services. If you need to engage a team to help you investigate and respond to a tax audit, these fees can quickly add up. If your business is under pressure to meet the financial costs that come with an audit, it could be worth considering taking out tax audit insurance.
At iSelect we’ve teamed up with BizCover to bring you a range of tax audit insurance policies from their trusted insurance partners. Get started by comparing business insurance policies online.