As a business owner, you know the importance of risk management and mitigation. To protect yourself you need to regularly:- review your operation’s processes to make sure they’re meeting workplace health and safety requirements
- review your supplier chains to make sure products are available
- survey customers to gauge their satisfaction
Of course, you can’t foresee every possible situation, which is why you also have insurance. There’s workplace health and safety cover to insure your staff, property insurance for your premises in case there’s fire or natural disaster, and even life and income protection to cover you outside of work.
What is Audit Insurance?
What doesn’t it cover?
- taxes due as a result of the findings of the audit
- penalties incurred
- payment arrangement negotiations
- work that needed to be done before an audit
- redoing your financials as a result of the audit.
What could be investigated/audited?
- Income Tax
- GST or BAS
- Fringe Benefits Tax
- Employer Obligation Reviews
- Record Keeping
- Capital Gains Tax
- Payroll Tax
- WorkCover or Workers Compensation
- R&D Tax Concession (ATO only)
- Self Managed Superannuation Funds
- other lodged returns.
“The four broad areas of focus this financial year are: individuals who fail to declare income or make incorrect claims for deductions; tax risks associated with the use of complex business structures; correct reporting of taxable income by wealthy individuals; and participation in tax planning schemes.”
Absolutely not! While the tax office may be targeting these specific areas, it doesn’t mean they’ll be ignoring everything else. If there’s an issue, you could still wind up in their crosshairs.
This isn’t about your accountant getting it wrong. In fact, you can be audited even when your accountant has done everything right. As Gill McKerrow partner Philip Newell says, “Even if everything is squeaky clean it can still be a long expensive process to prove that… it can cost $25,000 just to prove you haven’t done anything wrong.”
An employee being dismissed from his workplace decided to cause a bit of trouble. So he queried whether he had been paid appropriately under his award.
The tax office began a comprehensive investigation, going back over ten years of payments (including superannuation) to the employee.
Now the business in question knew they’d been paying him fairly, even above award on occasion. Bit it didn’t matter—they still had to prove their case to the tax office.
In the end the tax office found they hadn’t done anything wrong, and so they weren’t fined or penalised in any way. But it cost them $25,000 in professional fees just to provide the evidence the tax office needed.
Fortunately this particular business had an Audit Insurance policy in place. If they didn’t, they would have had to find $25,000 in their business cash flow to pay their accountant and solicitor.
How much does it cost?
Premiums start from $99 p.a. (including GST) and are based on the size of business, business structure, and whether or not it’s a self-managed superannuation fund.
And in most cases you should be able to claim the premium as a tax deduction.
So how do I get a policy?
Start by having a chat with us. A good policy should cover the cost of your accountant acting on your behalf, as well as any other professional advice needed, such as a solicitor. For this reason we use Audit Shield to give our clients this vital cover.
To find out more, or to discuss risk management strategies for your business, contact us online or phone +61 7 3378 7399.
