The possibility of being subject to a random audit is increasing every year, and when it does happen, not only does it cause disruption to your business, but it can also incur huge costs. Responding to official queries and audits can be time consuming, stressful and costly to your business. You run the risk of damaging client relationships if you have to submit unexpected invoices, or costing your business valuable time and money if you have to write off chargeable hours.
Even if you haven’t done anything wrong, the entire process of a tax audit can be an incredibly intimidating. Make sure your business is prepared with a Tax Audit Insurance policy.
What is Tax Audit Insurance?
Tax Audit Insurance covers professional accounting fees that arise from an audit conducted by the Australian Taxation Office (ATO) or any other Australian (Federal, State or Territory) government agency, which has the statutory responsibility to conduct audits in relation to taxation, duties, or levies.
Tax Audit Insurance can help your company cope with the disruptions and costs associated with unexpected audits.
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The Importance of Tax Audit Insurance
Tax Audits are on the rise, particularly among small to medium enterprises. For the past 4 years, the ATO has been investing in significant programs, staff changes and computer system upgrades to link together a whole host of information sources.
With audit benchmarks that they need to meet, chances of being subject to a Tax Audit are significantly increasing. Tax Audit Insurance can provide peace of mind, so that you know your business is covered when you’re selected for audit.
What Risks May a Tax Audit Insurance Policy Cover?
Any business, individual or entity, can be the subject of a Tax Audit regardless of the profession and/or technical advice provided. These occurrences are often unpredictable and you can find yourself on the receiving end of an audit, even if you do everything by the book.
In the event that it does happen to you, Tax Audit Insurance can absorb the financial hit. The following are a few examples of situations where Tax Audit Insurance can be extremely valuable:
- A retailer experiencing difficult trading conditions receives a Goods and Services Tax audit. The financial cost of dealing with the ATO on this matter can be a huge financial burden. Tax Audit Insurance can cover these incurred expenses at no additional cost to the business.
- A group of businesses derive a capital gain, which sparks a lengthy audit from the ATO. Tax Audit insurance can cover the firm’s assistance as well as necessary legal assistance in dealing with the ATO enquiry.
- An individual is data matched by the ATO and certain work related and rental property deductions are questioned. Tax Audit insurance may cover the professional assistance required to resolve all ATO questions.
- The ATO undertakes a selective audit of a self managed superannuation fund, focussing on the activities of the Trustee. The total cost of dealing with the investigation questions, and liaison with the ATO may be covered by Tax Audit Insurance.
What may be covered under Tax Audit Insurance?
Although insurance products and policies may vary, most covers will insure your business for professional fees incurred in connection with an audit by the Tax Office, state or territory revenue office or other body of your business’s financial or tax affairs.
Business affairs that may be covered include:
- Income, Land and Payroll Tax
- BAS/GST Compliance
- Workers Compensation / WorkCover
- Superannuation Guarantee and Compliance
- Self Managed Superannuation Funds
- Record Keeping
- Research and Development Grants (ATO Only)
- Stamp Duty
The professional fees that may be covered include:
- Fees paid to tax agents, financial advisers, accountants or solicitors who are not your employees, for the preparation of evidence to be submitted to the auditor.
- Fees charged to you for preparation of evidence by your financial service provider(s).
- Overtime paid to employees to prepare for or represent you in an audit.
- Travelling and accommodation expenses incurred by you or your employees in order to attend an audit.
Who Needs Tax Audit Insurance?
The Tax Commissioner has predicted that almost 15% of small to medium enterprises will be subject to the ATO’s compliance program, including some form of Tax Audit. No matter what business you’re in, you may be unlucky enough to fall in to this 15%.
Some audits are random, some can be the result of an anonymous tip, but most are generated within sophisticated ATO computer databases. The ATO have excellent people and intelligent systems, and even if you do everything by the Tax Act, you can still come up for a tax audit; which can result in significant disruption to your business.
How PSC Direct Works for You
As specialist small business insurance brokers, PSC Direct uses our considerable experience to provide multiple quotes for you. Combining our expertise insuring thousands of other similar businesses with our detailed database of insurers and insurance products; we’re best placed to advise you on the right insurance for your business.
We have strong relationships with the leading underwriting agencies and insurance companies. We can source the most appropriate business insurance policy for you, covering you for what you really need, at the right price.
We can help sole practitioners, small, medium and large businesses protect the businesses you are growing and ensure your assets are covered in the event that disaster strikes.
With our strong relationships to a broad range of highly-rated insurers we are able to advise you on business insurance, professional indemnity insurance, and public liability insurance specifically tailored to meet the risk exposure of your business.
We can also provide advice on a range of additional insurance policies and cover that can affect your business and make sure you have the right insurance at the right price.
- 72% of Australian businesses fail after experiencing a major loss.
The right business insurance will ensure you are not one of them.
While good insurance covers you for most things – Professional Indemnity, Professional Liability and Property, great insurance covers you for the specific risks that your business faces. We understand that every business is unique and you need a policy that addresses the specifics. We make sure that when you have a claim that’s out of the ordinary and complicated, you’re covered.