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Tax Audit Insurance Fact Sheet

Tax Audit insurance in a nutshell 
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* covers a business for specified costs in responding to an official tax audit. 

The low-down 
Responding to a tax audit can be a very stressful, time consuming and costly experience, even if you haven’t done anything wrong.

Tax Audit insurance, which is a cover option within a business pack, is a cost-effective solution to manage the expenses incurred if your business is audited by the ATO. It reimburses you for fees paid to accountants or other specified professionals for their time and service incurred because of the audit. 

Depending on the size of your business and the state of your books, an investigation or audit could take anywhere from a few days to a few months. 

Do you really need Tax Audit insurance?

With the ATO implementing sophisticated data matching techniques, it is easier for them to detect discrepancies between tax returns and the data they receive from government agencies, health funds, banks and other companies.

Random tax audits and investigations can be carried out not only by the ATO, but by several
State and Federal Government agencies, leaving you responsible for the costs involved in presenting the required information. 

Even a simple enquiry can take hours to respond to, potentially costing a small fortune

Did you know?

4 of the most common mistakes the ATO receives from small business tax returns are: 

• Errors from poor record keeping 
• Not declaring all income 
• Failing to account for private use of business assets or funds 
• Making mistakes because they don’t understand their tax obligations 

The ATO uses information available on social media platforms to monitor for displays of wealth from individuals that do not match up with what they report on income tax returns. 

What is typically covered?*

  • Accountants’ fees
  • Tax agent fees
  • Other specified professional fees

What is typically not covered?*

  • Fines or taxes imposed
  • Your time or salary or lost opportunities
  • Your employee’s time or wages

Claim Case Study*

A health food business was audited by the ATO requiring them to provide four years’
worth of accounting records from July 2013 to June 2017. As the business owner claimed
that the business was not operational for a period of 12 months between April 2015 and
March 2016,

The ATO required evidence of funds for personal living expenses during this time. Tax
Audit insurance covered the excess of $6,000 in costs charged by an accounting firm which
was engaged by the insured to present the required documentation.



 *This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover. © 2023 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769

Cyber Liability Insurance is designed to help protect you from claims and support your profitability in the event of a cyber breach or attack.

Professional Indemnity insurance is designed for professionals who provide a specialist service or advice, providing protection for financial loss and legal costs of a claim.

Public Liability insurance is there to provide protection if someone makes a claim against the insured, the business or its employees.

A health food business was audited by the ATO requiring them to provide four years’
worth of accounting records from July 2013 to June 2017. As the business owner claimed
that the business was not operational for a period of 12 months between April 2015 and
March 2016,

The ATO required evidence of funds for personal living expenses during this time. Tax
Audit insurance covered the excess of $6,000 in costs charged by an accounting firm which
was engaged by the insured to present the required documentation.



 *This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The provision of the claims examples are for illustrative purposes only and should not be seen as an indication as to how any potential claim will be assessed or accepted. Coverage for claims on the policy will be determined by the insurer, not BizCover. © 2023 BizCover Pty Limited, all rights reserved. ABN 68 127 707 975; AFSL 501769

tax
General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.


BizCover

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