In recent years, wealthy Australians and small-business operators have come under increasing scrutiny from the Australian Tax Office (ATO) as it intensifies efforts to ensure tax compliance. With nearly 1.3 million “client engagement activities” conducted in the last financial year, including tax audits and actions against incorrect claims, it’s clear that the ATO is leaving no stone unturned.
In light of these developments, we strongly encourage clients to consider Audit Insurance as an essential safeguard against unforeseen tax audits and investigations.
The Growing Impact of Tax Audits on Small Business
The ATO’s latest figures reveal that client engagement activities added $7.7 billion to federal government revenue in the last financial year. This demonstrates the ATO’s determination to hold taxpayers accountable for their financial obligations. As a result, small businesses, in particular, continue to be over-represented in tax debt, according to outgoing Australian Taxation Commissioner Chris Jordan.
AI and Automation Helps to Enhance Tax Compliance
The ATO has invested heavily in AI and automated systems to find incorrect claims and enhance tax compliance. These systems sent over 11,000 prompts to sole trader taxpayers, urging them to review amounts reported in their tax returns if discrepancies were found. This initiative resulted in 16 percent of sole traders adjusting their annual returns to comply.
Audit Insurance: A Wise Investment to Safeguard Your Finances
Given the increasing focus on tax compliance and the ATO’s expanding reach, audit insurance has become an invaluable asset for individuals and businesses, helping protect your financial interests by covering expenses related to professional representation due to an ATO audit or investigation.
What is Audit Insurance and what are the benefits?
Depending on the policy, Audit Insurance can pay professional fees if you find yourself in an audit, inquiry, investigation or review (audit activity) instigated by the ATO or other relevant government revenue agencies.
Insurance policies can cover costs (up to a prescribed limit) for the current year and, additionally (if included), all previous years’ returns, including late lodgements. They are also relatively inexpensive and depend on the size of the Taxpayer.
In most circumstances, associated individuals and family entities can be covered at no additional cost, providing extended coverage across family trusts and family businesses.
Now more than ever, Audit Insurance is proving to be a wise investment to safeguard yourself and your business interests.
It’s never too late to protect yourself and your business interests.
Recently, we have reached out to clients to offer the opportunity to take up Audit Insurance. For more information on Audit Insurance, please refer to our article on Am I at Risk of a Tax Audit? Or for more information and pricing, please reach out to your Morrows Advisor; they will be happy to discuss.