Nobody likes a tax audit. Once upon a time, it was only the biggest of businesses and the wealthiest of individuals who had to worry about such things. But in recent years, the ATO has cast their eyes on many small to medium sized businesses and requested an audit.
A tax audit takes time and money. That’s why we believe tax audit insurance is a good thing but avoiding a tax audit altogether is even better.
Two words guaranteed to strike fear into the heart of any taxpayer – tax audit. The Australian Taxation Office (ATO) has the power to audit any individual or business to verify the financial information being provided is real, true and correct. Compliance audits, especially those relating to Payroll Tax, are also becoming increasingly common.
But what exactly is a tax audit?
The ATO website states:
We conduct audits where we consider a more in-depth examination of the issue is required. Our audit program ranges from relatively quick examinations of source documents to more intensive analysis of complex arrangements and transactions….
Most audits are escalated from a review. However, where it is warranted, we may proceed straight to audit without conducting a review. This may happen, for example, in cases involving less complex issues, or where we suspect fraud or evasion, or where an arrangement or transaction is considered high risk.
There’s no denying tax audits are stressful but what triggers them? And what can you do to avoid being audited? This isn’t an exhaustive list, but a few common reasons include:
If you’re concerned about anything mentioned, please contact us to book a discovery session today. You’ll be glad you did, and you’ll be better off.
If you’re a client, contact us immediately. We can’t tell you how important this is as we’ll help you respond to ATO enquiries, prepare documents and attend any audit meetings with you.
If we’re not your accountants, contact your own accountant straight away. You may also need to seek legal advice.
Being audited by the ATO is not the time for you to go it alone. After all, you’re being audited for a reason.
First, you’ll receive a letter advising your upcoming audit. A suitable meeting time will be arranged, usually over the phone. Then an audit meeting will take place.
While having one of the Kelly+Partners team as your accountant or financial advisor is one of the best things you can do to ensure your financial and taxation concerns are being dealt with correctly, it’s no guarantee you won’t be audited.
Tax audits can be time consuming and expensive and that’s why we suggest you investigate tax audit insurance as a business must have. Just in case.
Tax audit insurance is an insurance policy designed to help cover the costs your business incurs when it’s being audited by the ATO.
Even the smallest of tax audits can be time consuming with responses, phone calls, meetings and the preparation of documents taking days, weeks and, in some cases, even months. A tax audit may also cover more than one reporting period, thereby considerably increasing the costs. This can all prove expensive for your business in time, resources and dollars.
While the exact insurance cover you have depends on the policy you’ve purchased, some of the things your audit insurance should cover include:
Tax audit insurance typically won't cover:
The cost of audit insurance, like the cover offered, will largely depend on the amount of coverage you require.
At the end of the day, even if a tax agent or accountant prepares your tax return, it’s your responsibility to ensure it’s true and correct. That all income has been declared and all expenses are genuine.
While it’s great to have tax audit insurance cover, it’s even better to have a great accountant as part of your team to avoid having a tax audit in the first place.
Here at Kelly+Partners our advisors are committed to ensuring your business is best placed to avoid a tax audit.
If you have any questions, please contact your local Kelly+Partners office today. You can also request a call back at a time that suits you.