Many business owners wonder if tax audit insurance is truly worth it. Usually, the reality shows up the instant an ATO audit alert finds its way into your email. What felt optional became necessary suddenly.
When the ATO knocks on your door, it’s about time, money, and having the correct backing to defend your position — not just documentation.
The Financial Risk in ATO Audits
Even if your records are perfect and you follow the rules, you could still be audited. And the professional bills start to mount up as that process gets underway.
Consider that:
- Your accountant might have to go over many years of records.
- Entry into books calls for reconciliation.
- If things become complicated, you could require legal advice.
- One must control back-and-forth with the ATO.
Even in cases when no fines are applied, it is not unusual for companies to incur expenses ranging from $5,000 to $10,000 merely in response to one audit.
Who Should Give Tax Audit Insurance Some Thought?
Any company can benefit, but if your situation falls into higher-risk areas, it will be extremely beneficial. You should seriously consider audit protection if:
- You run behind trusts, SMSFs, or some other layered arrangement.
- You have asserted R&D tax subsidies or significant GST refunds.
- You work in sectors the ATO regularly targets — like hospitality, building, or healthcare.
- You recently executed a succession plan or sold a piece of property.
If any of these situations resonate with your company, small business audit insurance is a prudent course of action.
Coverage of an Insurance Policy for Tax Audits
Basically, it covers professional fees — those you will pay while answering an audit, review, or investigation by the ATO or another government body.
This includes:
- Fees for accountants and bookkeepers
- Costs related to legal and advising services
- Time spent on your behalf corresponding with the ATO or authorities
To be clear, it does not cover any taxes due. However, it guarantees you won’t be left rushing to pay a $7,000 charge merely to show you did nothing illegal.
Undiscovered Expenses You Might Overlook
Not only does your accountant’s bill bite. An audit can reveal additional hidden expenses, such as:
- Correcting historical mistakes from amended returns
- Expert appraisals (usually needed in CGT or stamp duty contexts)
- More time spent handling disputes or answering official ATO questions
Together, all of this adds up. A well-organised audit insurance policy covers these costs so you’re not surprised.
Real-World Example
A nine-month payroll tax audit targeted at a mid-sized transportation company dragged on. The process involved legal advice, reconciliations, and several hours of advisor work. Their entire professional fee load came to $6,700. Their tax audit insurance with AuditCover helped them recover every penny, allowing them to concentrate on managing their business.
An ATO audit can strike when you least expect it. Use AuditCover for affordable tax audit protection and audit defense to protect your company and avoid the financial strain of handling it alone.
Ready to safeguard your business? Request a demo today and see how AuditCover can help you stay protected!