In everyday life, mistakes happen. Some cause us to suffer few consequences, others can trigger large changes in our lives. Let’s face it, if we didn’t make mistakes then we wouldn’t be human.
Unfortunately, when dealing with the Australian Taxation Office (ATO) and other federal, state and territory based agencies, a mistake may result in a review, investigation or an official audit.
Audit and compliance activity is on the rise
The ATO has stepped up audit and compliance activity over the years in a bid to recover significant amounts of unpaid or underpaid taxes. This activity will only continue to grow in the coming years.
By using third parties such as banks, employers and insurance providers, the ATO can cross-check and monitor information provided in your tax return. If the ATO believe you are not complying with your obligations, or if they believe a mistake has been made on your return, they may conduct a review or an audit to look at your affairs to ensure all the information given to them is accurate.
This can turn out to be a long and expensive process as they endeavour to gather the information needed from your accountant to conduct the audit. It can start with a phone call or letter from an ATO representative, and potentially develop into a full audit or investigation where they will conduct various meetings with your accountant and have open access to all your records and systems.
The duration of the process to resolve the issues varies from case to case and can take anywhere from a couple of days to many long, anxious months. Depending on the nature of the audit you may be out of pocket for a very substantial amount of money.
Minimise your costs in the event of an audit
In circumstances like these it is a great idea to cover yourself for any large unexpected out of pocket expenses if the tax man comes knocking. This is where audit insurance can be a valuable choice for peace of mind in the case of an audit.
Audit insurance is an optional service which provides clients with cover for professional costs (up to a prescribed limit) in the event of an audit or review by the ATO or other relevant government revenue agencies. The audit insurance service fee is paid annually, directly to the accounting practice that holds the policy. You are then added to the policy once the fee has been paid.
In the event of a phone call or letter from the ATO to advise you they are conducting an audit, you have the potential to be covered for the current financial year and any previous financial years whether the returns were prepared by your current accountant or another firm.
For the duration of the time that your accountant acts as your registered agent, you will be able to benefit from this service they offer. If you would like to discuss audit insurance further and how it can benefit you, give us a call.