There are few things that Australians fear about when they receive notices for tax audit. As per the ATO information, only personal integrity can give a valid reason not to fear the audit, especially that most Australians pay their taxes honestly. In fact, many taxpayers refuse the benefits they’re legally entitled to as it can be a possible reason why they are getting audited by the tax agency. Sometimes, they may have considered availing a tax audit shield just to protect them from the unexpected.
So scared taxpayers will have peace of mind, few insurance companies have introduced audit insurance for them to avail. But with the odds of audit so low, is there really a need to pay a small amount for protection. In this article is a brief description when you may or may not need an audit shield for protection.
How Likely is an Audit?
Firstly, when you have an audit shield, it will not guarantee that a tax audit can be prevented. It will simplify the audit process for you by giving access to professional accountants or lawyers to defend you in this time of need. If you’re opting for this service, then potential audit issues can be encountered, and the audit insurance will help minimise the risk.
Before you invest in this product, you need to weigh things first, whether you’re getting audited to the potential taxes you’ll be fined after the audit. Sometimes, ATO will only review and require audit to some individual and business taxpayers. If the agency had to do audits, taxpayers required for audits come fewer in numbers and may just need some explanations. Unless you are dishonest with your tax returns, you may or may not need audit shield to back you up.
The extras you pay for an audit may somehow depend on the complexity of your tax returns. If you only have basic returns including your wages and standard deductions, then you don’t need to be audited, and even if you are audited, you’ll find it easy to justify the figures on your own. But if you have various types of deductions, extensive investments, or own your business, then the complexity level is substantial. There is a possible risk of getting things wrong and you may be required a tax audit.