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Have you ever been audited?

Discussion in 'Accounting & Tax' started by Jess Peletier, 11th Feb, 2016.

  1. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Hi all,

    My accountant has offered me audit sheild, which looks to be like an insurance cover in case I get audited. It costs about $300/yr, just curious if it's worth it?

    I'm all for insurances, but not sure how big the risk of getting audited is, and how much it will cost if I am?

    Has anyone here been audited before?
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Most personal taxpayers would incur very trivial costs associated with an audit. In almost all instances they will review work related and rental deductions etc and its fairly straight forward even if there are errors. The professional fees involved would be trivial unless its an imaginative return with inflated claims. Then the tax adviser will get bogged down is sorting out whats legit and whats genuine and negotiation of the error down to mistake rather than reckless.

    My last one for a taxpayer was a very creative deduction claim. I advised her and suggested we go back and admit it was a error on taxpayers part due to misunderstanding on taxpayer use of etax. Why argue when you cant win ? It makes ATO staff fight and dig heels. I just asked them not to impose penalties and they waived interest for prompt settlement of dispute. All wrapped up under $600. Sure they had a tax bill but audit shield doesnt pay that.

    Audit shield may be more beneficial for a small business.

    Audit shield only insures the accountant - It pays their fee if YOU get audited. It doesnt compensate you as such. I find that ironic. Why dont they pay it then?
     
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  3. Marg4000

    Marg4000 Well-Known Member

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    My brother and my son have both been audited. Each handled it himself and as the flagged deductions were all checked and verified over the phone as correct they were in the clear.
    Marg
     
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  4. York

    York Finance Broker Business Member

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    If your affairs are relatively straight forward, I'd say even if you were audited, like Paul said the tax agents fee would be trivial. If you have items that are more complex or issues that may involve creativity that the ATO have flagged as an area of interest for that tax year, or if your particular deductions/claims seem out of the ordinary it can get expensive especially if they get digging and want to look further into it and/or look at previous years.
     
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  5. Random Username

    Random Username Well-Known Member

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    My wife has been audited twice, both times because her income didn't fit the norm/profile of her occupation.
     
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  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Was it expensive for her to go through?
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Sounds like LMI which covers the bank's excessive exposure to your loan - doesn't stop the borrower going belly up.
     
  8. Random Username

    Random Username Well-Known Member

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    Not at the time from memory as there was nothing wrong, she must have just "stood out" because there was a lot of rental income added to her wage income.

    We do have the "audit insurance" but it doesn't keep you out of jail, just pays the accountants time for sorting it.
    Once again from memory, I think the annual fee was $175 but I could be wrong on that.
     
  9. D.T.

    D.T. Adelaide Property Manager Business Member

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    Audited for my tax affairs, no. Though I have taken ATO to the Administrative Appeals Tribunal for a deduction they declined and I won.

    Business gets audited annually though.
     
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  10. hobo

    hobo Well-Known Member

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    We were offered audit insurance by our accountant a few years ago. He told us at the time that he was very comfortable with what they (ie we) were claiming as deductions etc, and that the firm as a whole did not operate outside of fairly standard parameters, so the risk of being flagged as potentially dodgy by the ATO was low (no vehicles owned by the company and claiming 100% business use etc). Ultimately there's always the chance of a random audit, of course, but we're certain we can back up everything we claim.

    He said he didn't think we needed it. We chose not to take it.
     
  11. Xenia

    Xenia Adelaide Property Manager Business Member

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    My trust account gets audited every year, I have been personally audited several times too - I don't deal with any of it, my accountant does.
     
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  12. York

    York Finance Broker Business Member

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    Is that because of your trust accounts David?
     
  13. D.T.

    D.T. Adelaide Property Manager Business Member

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    The latter yes (but not by ATO), the former no - was because of a CGT issue I wrote about on Somersoft a couple of years ago.
     
    Last edited: 11th Feb, 2016
  14. sanj

    sanj Well-Known Member

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    I haven't been audited and am thoroughly anal in terms of always keeping within the law with deductions etc but I do expect to get audited one day simply due to multiple business interests etc
     
  15. D.T.

    D.T. Adelaide Property Manager Business Member

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    They probably have no interest in you - I assume doing things by the book is the best way not to raise any flags with them? If you keep really good records, come audit time it'll be easy to demonstrate what you're doing.
    Reporting you for child labour! :p
     
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  16. Santaslayer

    Santaslayer Well-Known Member

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    I get the same Tax Shield note but mine would cost $99 if I chose to pay. $300 seems steep.
     
  17. See Change

    See Change Timing Lord Premium Member

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    We've never been offered it .

    I think the point hobo raised is an important one

    We've used the same "conservative suburban accountant " ( Tony ) for nearly 30 years . We've deliberately never gone the path of using a " property savy / wealth creation " orientated accountant for our returns . On several occasions we have sought specialised advice on specific issues or for strategic advice . The last time we did this we were told we were going well .

    The reason we haven't gone that path is that ( I think ) there is a greater risk of other clients of that type of firm wanting to push the limits and maybe doing things that come under the scrutiny of the ATO , with the potential for their other clients coming under scrutiny

    In terms of our accounting we don't do anything dodgy , but our structure is complicated and an Audit would be a PITA , and hopefully something I don't have to go through .

    Cliff
     
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  18. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I have cautioned about this. The ATO do monitor social media etc for admissions and issues that are out of place.
     
  19. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    If its meant to be a $1k refund or $4k payable. Yes.

    Audit Shields business practices require the accountant to send an offer to ALL clients including non-business. You cant exclude clients. I didn't like that they manage it. I didn't like the privacy issue/s.
     
  20. D.T.

    D.T. Adelaide Property Manager Business Member

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    Sorry i think I worded that badly, I meant that I mentioned the outcome after the case was closed