The ATO has been on the warpath trying to generate tax revenue for the government. That means businesses, individual taxpayers and Self-Managed Super Funds should take note. There has been a jump in the number of audits, enquiries and investigations on ATO lodgements. Given the ATO has been given additional funding to enhance its data-matching capabilities we anticipate more of the same. Simply put, the tax office will come for you at some point, and an audit can be an expensive process.
A random audit is not necessarily your fault or that of your accountant. You can be notified of a random audit or investigation of your previous lodgements at any time. Statistically, a random audit can be expected by a business or an SMSF once in every four years.
When the tax office subjects you to an audit, review or investigation, you will have to shoulder the professional fees necessary to produce any documentation or information. Even the simplest of enquiry could require hours of work.
What Can You Do?
Many PJT Clients have chosen to protect themselves by taking out an Audit Shield Policy. This covers professional accounting fees during a random audit.
The ATO is not the only body that can conduct a random audit. Any other Australian (Federal, State or Territory) government agency can subject you to a random audit, review, enquiry or investigation.
How Does Audit Insurance Help?
Below are a few real life examples of people who have been audited, but were proactive to be covered by Audit Shield.
# 1: Retailer – “Help when we needed it”
Type of activity: GST Audit - No additional tax payable
End result: $6,800 accounting fees fully covered
A Melbourne retailer who was experiencing difficult trading conditions received a Goods and Services Tax audit. The financial cost of dealing with the ATO would have been a burden on the client. The outcome for the client was that the audit was dealt with at no cost to the business.
#2: Business Group – “We have seen an increase in data matching”
Type of activity: Tax Audit - Capital Gains Transaction
End result:$25,000+ accounting fees covered
A group of businesses derived a capital gain. The ATO commenced lengthy audit action and support was able to be provided under Audit Shield for not only the firm’s assistance but also for legal assistance that was necessary for dealing with the ATO enquiry. The positive outcome for the client was that a robust and measured defence of the ATO claims could be made using the cover available.
#3: Individual Taxpayer – “Audit Shield gave me peace of mind”
Type of activity: Tax Audit Review - client 100% correct
End result: $3,450 accounting fees fully covered
An individual living in rural Victoria was data matched by the ATO and certain work related and rental property deductions were questioned. Professional assistance was provided and all the ATO questions were resolved. The positive outcome for the client was that they were fully supported, the audit assistance professional fee was covered, and the ATO cleared the client.
#4: Self-Managed Superannuation Fund – “Increased ATO audit activity”
Type of activity: Tax Audit - no cost for professional assistance
End result: $6,300 accounting fees fully covered
The ATO undertook a selective audit of a Self-Managed Superannuation Fund. This audit focused on the activities of the Trustee. The positive outcome for the client was that the total professional cost of dealing with the investigation questions and liaison with the ATO was covered.
Audit Shield insurance, as it has extensive cover which includes reviews, investigations, audits, and enquiries on the following:
- 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
- And many more!
PJT can assist in providing quality tax audit insurance through their independent brokers should you consider this a worthwhile investment. You can call us at (07) 5413 9300 to discuss your needs or alternatively, you can book a confidential consultation with us online here.