If you're a Dewings client you'll know that we pride ourselves on making sure our advice is sound and our work is as accurate as possible.
Unfortunately, even in cases where everything is perfect, the cost in accounting fees of responding to an audit query and providing substantiation can be significant. If there are matters that require further investigation and discussion, the costs can escalate even further.
This has always been the case in the event of an audit. In recent years, however, the risk of being audited has increased significantly as the Tax Office continues to increases audit activity. This makes audit insurance more important than ever before. The Tax Office continues to develop and deploy more and more sophisticated data matching technologies which enable detailed cross-referencing of information from government departments. This in turn increases the frequency and scope of audits, reviews and investigations.
In addition, the Tax Office continues to increase audit activity simply to ensure better compliance and, we suspect, increase Government revenue. For example, the Tax Office recently signalled its intention to increase audit activity for Self-Managed Superannuation Funds by 78%. This alone means that the chances of being the subject of a review have increased substantially, even if you're not doing anything that might attract attention.
Audit insurance won't cover any additional tax or interest that may need to be paid in the event that an audit finds discrepancies. However it does cover any accounting fees incurred for all enquiries, reviews and investigations - from the very first dollar (up to a prescribed limit). There is no excess, and it covers the activity of most State and Federal bodies, including WorkCover, Payroll Tax, ASIC and the Tax Office (which covers Income Tax as well as Fringe Benefits Tax and BAS/GST). In addition, it covers the costs of engaging additional legal opinion in the case of preparing a defence.
The cost is tax deductible and covers the taxpayer and his or her spouse (where applicable), as well as entities in which they have a significant interest (e.g. companies, trusts etc. - self-managed superannuation funds need to be insured separately, however, due to their more complicated nature).
We encourage you to consider the offer of audit insurance carefully, and please contact us if you would like any further information.