According to the law prevailing in Australia, the Australian Tax Office (ATO) is entrusted with the task of conducting random audit of companies and various other establishments. The purpose of this audit is to ensure that you have complied with the tax law of the State. At the same time, during the process of audit by the ATO, you may have to incur certain expenses like fee for the auditor and so on. In such cases, you may avail the benefits of audit protection insurance, which protects your firm from such unforeseen expenditure.
As already said, ATO conducts the audit randomly. The ATO may randomly select your business enterprise and conduct the audit. In the normal course, by rotation most of the organizations come under the scrutiny of ATO at least once in every four years.
Cuts into profit:
This audit is conducted without giving prior notice to you. At the same time, the expenses on random audit can be huge. In such cases, you might not have created a budget to meet the expenses on such random audit. Naturally, it will be an extra burden on your income. In order to cover such unforeseen expenses, you may take up the audit protection insurance.
Compliance with related laws:
While conducting the random audit, the ATO will examine your compliance with the tax law on matters relating to payroll tax, land tax, compensation to workers, development grants if any, GST, superannuation payments and various other incomes. In addition to this, the ATO will also examine, while dealing such matters, whether you have also complied with various related legislations that may be in force.
Look for old records:
Once the ATO starts the random audit, you are obliged to provide him all the necessary records. In the normal course, the ATO may also require written explanation on various accounting or legal issues. In such cases, your staff may have to work extra hours to dig the old records for which you may have to compensate the staff suitably.
Services of Attorneys or Chartered Accountants:
There can also be instances that you may have to take the assistance of your attorneys or chartered accountants to provide suitable clarifications to the ATO. In such cases, you will have to pay a suitable remuneration to the attorney and the chartered accountants. All these will involve huge expenditure and in order to meet such unforeseen expenses it would be ideal that you may take an audit protection insurance.
Management Liability Insurance:
At the same time, it should be noted that protection insurance for audit is different from the Management Liability Insurance. The random audit conducted by the ATO is not covered by the Management Liability Insurance.
Choose a suitable insurance policy:
You can take the insurance from any of the reputed insurers. The terms and conditions of insurance for audit protection differ from one insurance company to another. Some of the insurance companies have a unique insurance policy which covers both SMSF and tax audits. It would be ideal that you may contact your chartered accountant who would help you to choose an insurance policy that is suitable for your business.