Australian Taxation Office reviews, audits and investigations … are you prepared?
Random audits, reviews and investigations are conducted by the ATO and other Federal and State Government agencies to ensure compliance with various tax requirements. This is an inevitable part of our tax system and in the 2009/10 Compliance Program, the ATO indicated that they would be undertaking the following activities during 2010:
- 2,000 new high wealth individual and SME income tax and fringe benefits tax verficiations
- 370 audits and 650 reviews of SMEs
- 120 audits and 420 reviews of high wealth individuals
- 300 new high wealth individual and SME reviews
How likely am I to get a random audit, review or investigation?
Any client can be randomly selected for further review or query and we have already seen evidence of this increased ATO activity over the last 12 months. With the need to fund Budget deficits, the ATO continues to announce significant increases in their audit activity. Now more than ever, you are at risk of being selected for a random audit or review.
What costs will I incur if I am selected for a random audit, review or investigation?
If you are subjected to a random audit, review or investigation, you are responsible for the costs involved in providing the required information. Even the simplest enquiry can require hours of work. In some cases, when there are complex environments, unusual circumstances, multiple years or multiple companies and trusts, thousands of dollars in accounting and legal fees can be incurred.
How can I protect myself from the costs of random audits, reviews and investigations?
Tax audit insurance can assist with the costs associated with an audit or review. A reputable policy will usually cover the following:
- Accounting fees in responding to audits, reviews & investigations of your lodged returns, including those from previous years.
- Random government audit, reviews & investigations for Payroll Tax, Workers Compensation, Self Managed Superannuation Funds, Income Tax, BAS/GST, FBT, R&D, Superannuation Guarantee and Record Keeping - to name a few.
- Specialist’s professional fees if a tax lawyer is needed for an opinion or defence.
Tax audit insurance generally has no excess and is deductible for tax purposes.
If you would like to know more about tax audit insurance, please speak to your Fordham director.