Tax Audit Insurance
Tax Audit Insurance
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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).
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 development.1https://www.ato.gov.au/Business/Privately-owned-and-wealthy-groups/What-you-should-know/Tailored-engagement/Audits/#Finalisingtheaudit/ 2https://www.ato.gov.au/Business/Privately-owned-and-wealthy-groups/What-you-should-know/Tailored-engagement/Penalties-and-interest/
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 expenses.3https://www.ato.gov.au/Business/Privately-owned-and-wealthy-groups/What-you-should-know/Tailored-engagement/Audits/#Finalisingtheaudit/
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!
At iSelect we’ve partnered with BizCover to help your business compare tax audit insurance policies^. Get started by comparing business insurance policies online, or call us on 13 19 20.
*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.