ATO audit: Do you have tax audit insurance?
Tax audit insurance covers a business for costs that may be incurred by the business in the event of a tax audit by the Australian Tax Office (ATO).
Dealing with a tax audit by the ATO can cost you thousands of dollars and pose a major financial risk to your business. A tax audit insurance policy usually covers the costs of tax lawyers, accountants and other professional fees that may be incurred by a business in the course of an ATO tax audit.
Being audited by the ATO can be daunting, stressful and costly. To get the best outcome for your tax audit, you will usually need to engage a tax lawyer, accountant and other professionals to help you. Depending on the type of audit and its complexity, the ATO audit can take many months to be completed and the legal and accounting fees for a tax audit can be substantial. Therefore, it would be prudent for your business to have tax audit insurance to cover those costs.
The ATO has the legal power to audit and investigate your tax affairs, and there is nothing you can do to stop this happening. Therefore, the best thing you can do is be well prepared for a possible audit by the ATO and manage the risks and costs by having tax audit insurance.
What is generally covered by tax audit insurance?
The fees and costs generally covered by tax audit insurance can include:
- Tax lawyer’s legal fees
- Tax barrister’s fees
- Accountant’s fees
- Tax agent’s fees
- Other specified professional fees (e.g. expert fees)
The actual fees covered will depend on each specific insurance policy.
What is generally not covered by tax audit insurance?
The following items are usually not covered by tax audit insurance:
- Additional tax that you may need to pay to the ATO after the tax audit
- Penalties that you may need to pay to the ATO after the tax audit
- Interest charges you may need to pay to the ATO after the tax audit
- Your personal time or salary in dealing with the ATO audit
- Your employees’ time or wages in dealing with the ATO audit
- Your lost opportunities in having to deal with the ATO tax audit
The actual items excluded will depend on each specific insurance policy.
Which laws may be covered by tax audit insurance?
The insurance policy will outline the scope of the insurance cover.
For example, the insurance policy might state that it will cover all professional fees associated with tax audits, investigations, examination or review undertaken by the ATO in relation to the following tax laws:
- Income Tax Assessment Act 1936 (Cth)
- Income Tax Assessment Act 1997 (Cth)
- Fringe Benefits Tax Assessment Act 1986 (Cth)
- A New Tax System (Goods and Services Tax) Act 1999 (Cth)
- Superannuation Guarantee (Administration) Act 1992 (Cth)
If you have any doubts on whether your insurance policy sufficiently cover you for all the relevant laws administered by the ATO, you should get legal advice from a tax lawyer.
Legal advice from King Lawyers on ATO tax audits
This article is offered as general information only and should not be relied on as specific legal advice on ATO tax audits or tax audit insurance.
To get legal advice from King Lawyers on your specific circumstances, please contact us to arrange an initial consultation with our experienced tax lawyers.