Tax Audits and Tax Audit Insurance

What is a Tax Audit?

Tax audits may occur for many different reasons and most tax payers are unlikely to face an audit from the ATO where our advice has been followed and all information about your financial affairs are disclosed when preparing your tax return.

We endeavour to ensure that your tax returns lodged with the ATO are correct, based on the information available to us, so that they will succeed in passing an ATO audit should one ever prevail.

Being selected for a tax audit does not necessarily mean, that you as a tax payer, have done anything wrong. It may simply be that you are outside the benchmarks set by the ATO and they are conducting a check to ensure compliance. Tax payers with more complex affairs or who operate in industries being targeted by the ATO are more likely to receive an audit.

The audit itself will consist of the ATO making enquiries of you and us as your advisors. These enquiries may range from the simple to the complex and cover multiple periods. Responding to them may involve collating information and preparing detailed communications to inform the ATO of your situation. This process can take up significant time and resources.

Often there is no further action taken by the ATO after the audit has been completed and they are satisfied that you are complying with the tax law. Unfortunately this does not mean you won't incur costs in assisting the ATO with the audit. Any time and professional fees incurred by you in helping the ATO with their enquiries are borne by you as the tax payer. Liaising with the ATO in relation to a tax audit is not covered in our engagements unless specifically stated in your engagement letter.

What is Tax Audit Insurance?

Tax audit insurance will provide cover for all Accounting Fees and related costs incurred in responding to an Audit or Compliance Obligation by a government authority including the Australian Taxation Office. For the avoidance of doubt it does not cover the payment of tax liabilities that may arise as a result of reassessment your tax position.

It is often faster and easier for us, as you accountants, to deal with the ATO on your behalf in relation to an audit. By being covered by a tax audit insurance policy our fees will be paid and you can leave it to us to handle it. 

Therefore we like to make you aware of tax audit insurance as an option and facilitate the policy to give you the added peace of mind that you are covered in the event of an audit.

Taking out a policy

We have established an Audit Insurance facility in conjunction with Express Insurance and CGU, which provides you with Audit cover at very competitive premiums, and the ability to purchase the policy online in a few minutes.

The application process is simple and will only take a few minutes to complete as follows:

Application

• Follow the link above and complete the application details. When you get to the Declaration page, you can either pay by credit card or select the Premium Funding option to pay over 10 months.
• Once you have paid, the cover is in place and you will receive your insurance documentation automatically by email.
• Six weeks prior to the renewal date you will receive an email automatically with the prior year information displayed, and you can pay again to renew and if necessary update your details. Reminder emails will be sent up to your renewal date.

If you do not receive the confirmation or renewal emails or have any questions regarding the application process please don’t hesitate to contact our office or Richard Coloretti from Express Insurance on 03 9425 1313.

Considerations

When taking out tax audit insurance it is important that every tax payer you wish to be covered under the policy is listed correctly. The name should match the ATO's record of them. As an example:

• For a company: ACME Pty Ltd
• For a trust: The trustee for the ACME Trust
• For an individual: Mr John Smith

A tax payer is an entity with a tax file number.

The tax payer will be covered if at the time of receiving a notification of an audit from the ATO they have a valid policy.

Help

If you need any assistance completing the form, please contact us.