6th September 2016
Our perceptions can deceive us. Some accountants believe that if they are efficient, they do not need tax audit insurance. Their perception is far from reality as audit activity is not purely linked to the quality of an accountant’s work.
The common misconception is heard regularly by the team at Accountancy Insurance. However, the proof really is in the pudding. More than 3,000 claims are submitted each year in Australia by Audit Shield (tax audit insurance) client accounting firms. A substantial number of the lodged returns under scrutiny do not actually require further adjustments to be made.
The reality is that the Australian Taxation Office (ATO) has been provided with additional resources, in fact audit funding by the government will increase by a proposed 55% over the next four years, which is anticipated to dramatically increase the number of transactions reviewed.
The ATO and other government agencies are flexing their muscles and investing in resources in order to thoroughly review every possible transaction. Recently the ATO Assistant Commissioner Graham Whyte said “Every tax return is scrutinised using increasingly sophisticated tools and data analytics developed by our ‘data doctors’ at the ATO.”
In the first instance these transactions do not discriminate between ‘good’ and ‘bad’. If an individual, business or SMSF has been selected for scrutiny, despite whether the return was lodged correctly and no further adjustments are required, subsequent professional fees are likely to be incurred as a result. As an accountant, you can either absorb these fees or pass the cost of the professional fees onto your client. Either option is not ideal. With Audit Shield the professional fees associated with the instigation are covered.
In excess of 180,000 clients of accountants are currently participating in Audit Shield, and more than 2500 accounting firms in Australia, New Zealand and Canada offer the tax audit insurance solution to their clients. More than $1,000,000* in claim payments for professional fees is processed per month by Accountancy Insurance.
*Figures are based on an average monthly total from Accountancy Insurance’s claims data since June 2015 of client accounting firms in Australia and New Zealand.