Tax audit insurance usually only amounts to a few hundred dollars and when you compare this to the thousands of dollars it could cost to engage accounts, bookkeepers and lawyers, tax audit insurance starts to make sound economic sense.
Small-business operators are unwittingly exposing their businesses to huge financial risk by not taking out tax audit insurance.
Research we conducted with small-business owners across Australia found 45 % of business owners didn’t have audit insurance and another 48 % had never even heard of it.
For just a few hundred dollars, SMEs could potentially save tens of thousands of dollars in the event they’re audited by the Australian Taxation Office – ATO.
The ATO is increasing the number of audits they conduct every year. Unlike in the past, the businesses they’re auditing are chosen at random. There’s no longer a focus on size, structure or industry. You can never be sure who will be targeted next.
Of the businesses our research covered that had been audited, 51 % paid in excess of $3000 to $5000 in the process.
Most small business would not have a spare $5000 to throw away on being audited but costs are incurred because of the additional accounting, bookkeeping and legal costs associated with an audit. For many small business this could lead to substantial financial hardship.
On the flip side the cost of tax audit insurance usually only amounts to a few hundred dollars and when you compare this to the thousands of dollars it could cost to engage accounts, bookkeepers and lawyers, tax audit insurance starts to make sound economic sense.
I’m surprised, and worried, by the large number of SME operators who were not aware that tax audit insurance was available and affordable.
Unfortunately, there is a misconception amongst small-business owners that the tax office only target big business so they don’t have to worry but that is just not the case anymore. It is worrying that close to 50 % of small business people don’t know about a simple solution to protect themselves.
I encourage small-business owners to look into tax audit insurance and weigh up the risks of ignoring it.
Clive Barrett, Executive Chairman, First Class Accounts