Tax Audit Insurance

Hi,

I renewed my building/landlords insurance policy recently. I have both policies with the same insurer and am fairly happy with them so far.

In the post along with my annual renewal, there was a brochure for an add on component to the insurance - Tax Audit cover. It didnt have a price, and I couldnt be bothered calling up to ask, but apparently in the event that the insured person is audited by the ATO, they'll give you $1000 to cover costs relating to organising your tax affairs.

Is this useful to anyone in this country? I'm guessing maybe they just send it out and 1 in 1000 takes it on, and they make their money out of it. Playing the stats.

Anyone else heard of (or have) this?

Hi Dave,

Our accountant recommended we take this out after being interviewed for an article. We took his advice on this one, costs bugger all, and basically picks up the tab for the accountant's time to hold your hand if the people with thick glasses and very fine tooth combs start probing around your posterior.


A little bit of piece of mind. I think an ATO full audit would strike fear into most taxpayers. Even if it didn't, the time and cost of your accountant would soon add up.

It's amazing what the insurance companies come up with to generate new sources of revenue...

dtreager...
Vero are plugging this big time.
selling it as part of bus packs, home policys, all sorts.
within a bus pack its approx $70 add on - not a bad idea too.

almost all broker policies have it inbuilt as a standard extra, so its nothing new. limit is generally at $5000.

wouldnt be too keen on purchasing it for $1000 as extra cover when its pretty much standard anyway.

Hi

I think that 'tax audit insurance' is a rip off. I am not a fan of it at all.

The insurance pays for your accounting fees in handling an audit. It does not pay for the tax; the fines or the interest charged by the tax office...and, there are so many holes in the cover that you can still end up paying the accountant anyway.

It was someone's idea of allowing accountants to make more money by selling it to their clients.

Sorry guys.

Dale

I might add one comment after Dale's input.

This is an insurance that doesn't insure you against the BIGGEST risk of a tax audit: an unexpected large tax bill.

What's the point of an insurance that doesn't cover you against your largest potential risk, and merely offers a maximum payout of $1,000?

Surely someone who couldn't afford a $1,000 unexpected expense shouldn't be in the property investing business....

Cheers,

Dale

I have had an accountant who offered this as an option to clients- some five years ago.

The assumption made by the accountant was that everything (s)he had done was correct- and that the only expense to the taxpayer wathe cost of the extra accounting fees. There should be no extra tax, interest, or anything else if the accountant has done their job (assuming that the client has provided full and accurate information).

I was talking with somebody last week who was audited- who found out as a result that he had paid $15K TOO MUCH in tax, and would be refunded (though he was told that the method he had used, under accountant's advice) was now no longer available.

geoffw said:

I was talking with somebody last week who was audited- who found out as a result that he had paid $15K TOO MUCH in tax, and would be refunded (though he was told that the method he had used, under accountant's advice) was now no longer available.

Click to expand...

Nice Tax Audit!

First time I hear of something like that.

Maybe we shouldn't be afraid of tax audits after all.

Disappointing about the accountant though...

Cheers,

Thanks for that, Geoff.

It is actually quite common for audits to result in a little extra tax refund rather than a tax bill. You would probably not be amazed at just how motivated to find receipts people suddenly become when they get a please explain.

Dale

geoffw said:

Dale

I have had an accountant who offered this as an option to clients- some five years ago.

The assumption made by the accountant was that everything (s)he had done was correct- and that the only expense to the taxpayer wathe cost of the extra accounting fees. There should be no extra tax, interest, or anything else if the accountant has done their job (assuming that the client has provided full and accurate information).

I was talking with somebody last week who was audited- who found out as a result that he had paid $15K TOO MUCH in tax, and would be refunded (though he was told that the method he had used, under accountant's advice) was now no longer available.

Click to expand...

some new info on tax audit topic, as advised today:


""Terri Scheer Landlords Insurance has launched a new product. The new feature covers landlords for up to $A2,000 in accounting fees related to their investment property if audited by the Australian Tax Office (ATO). In 2006-7, the ATO is expected to review 6,000 rental income and expense claims that would lead to 3,600 audits. Terri Scheer, the CEO of the company, said landlord insurance policies should include clauses that cover malicious damage by a tenant, accidental damage, legal liability, and loss of rental income""

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Cover $1000 per audit, $2000 in total.
Is treated as additional section under Landlords preferred policy.

I mentioned above that tax audit is standard inclusion in all broker home/contents policies.
Also seems that direct insurers are now offering as a paid extra on their policies (which is a joke that youd have to pay for it, but thats an aside...).

No other landlord insurer has included as yet, so this seems to be first offering in the market and would expect others to follow suit (perhaps in a year or so it will be standard in broker offered landlords policies, and may be offered as an extra for payment, in direct landlords policies).

Ive no connection to scheer and dont sell the product, so just offering as a little info is all.