The fear of an ATO audit may be a nightmare for even the most honest business owner. But with tax audit insurance, you can take what is potentially a disaster and turn it into something that you can control.
Why Are Businesses Audited?
ATO audits are commonly triggered by:
- Third-party data mismatches
- High-risk industry classification
- Large deductions or GST refund claims
- Random selection
Even honest taxpayers become caught up in the ATO’s sophisticated review systems, so audit preparation is imperative.
The True Cost of an Audit
Just answering a few questions to answer an ATO audit is not it. It can mean:
- Compiling years of financial records
- Engaging external accountants and tax lawyers
- Preparing formal submissions to the ATO
These professional charges can range as high as $5,000 to $10,000, based on the complexity of the audit. Tax audit insurance shields you from these charges so that you are not billed with the unexpected cost of an audit.
How Does Tax Audit Insurance Save You?
With tax audit insurance, you are shielded from:
- Accounting and bookkeeping fees
- Tax agent and professional guidance
- Liaison services with the ATO on your behalf
This means that you can respond in full without the risk of incurring professional fees. It also means you are backed by professionals, so you can focus on your business rather than audit complexity.
Common Audit Triggers to Be Aware Of
Common audit triggers are:
- Claims for significant or unusual deductions
- Sustained business trading losses on returns
- Use of family trusts and complex structures
Being aware of these triggers can help reduce audit risk, but won’t eliminate it—tax audit insurance ensures you’re prepared for any situation.
Real-World Example: How Tax Audit Insurance Works
Case Study:
An IT consultancy in Sydney faced a GST audit after claiming several large input tax credits. Their accountant spent three months liaising with the ATO, costing $4,200. Their AuditCover policy fully reimbursed these costs, ensuring business operations continued smoothly.
👉 Protect your business today. Learn more about AuditCover and how we can help you stay protected during ATO audits. Request a demo now!