Tax audit insurance for small business owners

For individuals such as property investors and small business owners the possibility of undergoing a tax audit from the Australian Taxation Office (ATO) is a legitimate concern.

Audits require substantial time and effort and may also incur considerable expenses as the professional fees involved in preparing for an audit can be significant. This is where tax audit insurance becomes valuable.

While you may already possess insurance coverage for public liability, it is prudent to consider tax audit insurance as well. 

What is Tax Audit Insurance?

An ATO audit is often unexpected, and managing the preparation can divert valuable time away from running your business. In many cases, engaging professionals is the most effective course of action.

Tax audit insurance is designed to cover audit preparation costs allowing qualified professionals, such as accountants, to handle the process on your behalf, including communicating directly with relevant government agencies, such as the ATO.

While tax audit insurance covers you for costs associated with audit preparation, it doesn’t cover any taxes, fines, or penalties the ATO may impose following their conclusion.

Why should I consider Tax Audit Insurance?

The key benefit of tax audit insurance is financial security.  

An audit may occur randomly or be prompted by discrepancies in Business Activity Statements (BAS), income tax returns or irregular financial activity, making the risk of incurring professional fees for audit compliance a genuine concern.

Tax audit insurance offers peace of mind to business owners by ensuring that the costs associated with obtaining specialist assistance are covered, allowing them to receive quality advice and service, with the aim of minimising potential challenges or additional expenses.

Who is Tax Audit Insurance for?

Tax audit insurance is suitable for a wide range of individuals and entities, including property investors, small businesses and self-managed super funds (SMSFs)—particularly those lacking the time or financial reserve to absorb sudden, unforeseen costs such as audit-related fees.

This type of insurance is especially beneficial for those operating in sectors subject to frequent audits or for individuals and businesses with complex tax affairs. Those with variable financial activities, or investors who have acquired or disposed of assets such as property, may also benefit due to increased scrutiny from the ATO.

Although facing an audit can be a challenging prospect, the associated financial impact does not have to be. Tax audit insurance represents a practical solution, addressing the cost of professional services during audits and enabling business owners and investors to focus on their core activities.