When the tax man comes knocking, many try to hide! Even if you have done everything correctly within your business and have all of your records in place, a tax audit by the Australian Taxation Office will still leave you out of pocket. Why you ask? Because you will need to pay for your tax accountants to work extra to supply whatever the ATO needs.
In more technical terms, you need a very comprehensive insurance product in order to cover the professional fees you will need to pay as a result of the financial audit, inquiry, investigation, or review by the ATO or other authorised federal, state or territory body.
The Tax Commissioner has previously predicted that up to 15% of small to medium businesses will need to comply with the ATO compliance program, which includes tax audits. For this reason it is important to be prepared for what could be a bill summing up to thousands of dollars.
A tax audit might check that your business is adhering with requirements such as:
- Tax for income, land, and payroll
- BAS/GST compliance
- Workers compensation
- Superannuation needs
- Record keeping
- Any specific requirements requested by the authorised body
All of these things will take time and we all know that time also means money. However, the difference here is that this money is not what you might have expected to spend and may not have set aside. Plus it is also difficult to estimate how long a specialised audit will take or what the body may ask for.
It is also possible to get different levels of cover regarding your business so it is good to check with your broker for the best possible package suited to your needs.
Having this peace of mind helps you to perform your job as usual and takes away the stress of having to organise and payout the extra for the tax audit. You will not know when the ATO will ask for the audit, but you can be prepared for it. If you require more advice regarding tax audit insurance, contact Contractor Cover today.
