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BAS & GST Audit Insurance

Understanding GST and BAS Audits in Australia

Goods and Services Tax (GST) and Business Activity Statements (BAS) are critical parts of the Australian tax system for businesses registered for GST. The Australian Taxation Office (ATO) uses regular audits and reviews to ensure that GST is correctly collected, reported, and remitted. A GST audit or BAS review typically examines whether input tax credits have been properly claimed, whether GST has been correctly charged on taxable supplies, and whether activity statements are consistent with the business’s financial records.

Errors—whether accidental or deliberate—can trigger a GST or BAS audit. Common issues include mismatches between GST collected and GST reported, overclaimed input tax credits, late lodgements, and discrepancies revealed through ATO data-matching programs. Certain industries, such as construction, hospitality, and retail, are more frequently targeted due to higher cash transaction volumes and complex reporting requirements.

Preparing for a GST or BAS audit can be a costly and time-consuming process, often requiring your accountant to review records, prepare detailed reconciliations, and liaise extensively with the ATO. That’s why many businesses protect themselves with tax audit insurance from AuditCover, which covers professional fees incurred during an audit. Below, we answer some of the most common questions about GST and BAS audits—and explain how audit insurance can help.

FAQs

Business Activity Statements (BAS) are the primary mechanism through which Australian businesses report and pay GST, PAYG instalments, and other obligations to the ATO. GST (Goods and Services Tax) is a 10% tax on most goods and services sold in Australia, and businesses registered for GST must correctly charge, collect, report, and remit it to the ATO. The complexity of GST treatment across industries, combined with evolving rules for digital and cross-border services, makes GST a frequent audit focus.
The ATO uses sophisticated systems to detect irregularities in BAS lodgements. Discrepancies between reported income, GST credits claimed, and third-party information (e.g. from suppliers or banks) may trigger an audit. High GST refunds, inconsistent reporting, or sudden changes in financial activity also increase audit risk. Errors can be unintentional—such as incorrect coding of transactions or failure to adjust for changes in business activity—but the ATO may still impose penalties if you cannot substantiate your GST treatment.
Businesses operating in high-transaction environments or cash-heavy industries are particularly vulnerable. These include:
  • Retailers and restaurants with large volumes of small sales
  • Trades and construction businesses claiming input credits on materials
  • Online sellers dealing in cross-border goods and services
  • Importers and wholesalers managing large stock movements
  • Businesses with in-house bookkeeping and manual record-keeping systems
  • Large or repeated GST refunds without supporting documentation
  • Mismatches between income tax and BAS reporting
  • Non-lodgement or consistently late BAS returns
  • Incorrect GST treatment of exports, imports, or non-standard supplies
  • Claiming GST credits on non-creditable items (e.g. entertainment or residential property)
For instance, if a business regularly claims high GST credits without corresponding revenue growth, the ATO may investigate whether the credits are valid or if purchases are being misclassified.

GST audits can be extensive and burdensome, requiring detailed invoice trails, corrected BAS, and reconciliations between GST and accounting records. You may need to amend past lodgements or respond to complex ATO queries.


AuditCover’s tax audit insurance helps by covering:

  • Accountant or bookkeeper time spent on audit responses
  • Fees for amending or reconstructing financial statements
  • Tax agent or legal costs to clarify GST treatment
  • Assistance with preparing substantiation documents or attending ATO meetings

Having insurance means your business is financially protected while engaging the right professionals to resolve issues.

AuditCover provides comprehensive cover for BAS and GST audits under a broader tax audit insurance policy. Our platform offers:

  • Fast, digital quote and bind tools for individuals and businesses
  • Dedicated support for accountants and advisers managing GST compliance
  • Claims support from specialists with experience handling ATO reviews
  • Integration with cloud accounting systems to streamline documentation
If your business reports GST or lodges BAS, get a quote today. Accountants and BAS agents can join the AuditCover Partner Program to offer clients a simple and effective way to manage audit risk.

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This insurance is issued by Auditcover Australia Pty Ltd (ABN 63 638 872 634, AFSL 535509) on behalf of the insurer HDI Global Specialty SE (ABN 58 129 395 544, AFSL 458776).

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