What Is It?
Audit Shield covers the professional fees that you may have to pay to your accountant to respond to an official audit, enquiry, investigation or review of returns lodged with Inland Revenue (IRD) or other government authorities.
It is a 100% tax-deductible annual fee, paid to your accountant. This product is a bit like travel insurance. It's there to cover you if and when an audit problem arises
Yeah But Mate, That'll Never Happen!
Don't be so sure. Here's a general idea of how it works:
So, What Does this Thingy Insurance Do Again?
Surely My Accountant is Organised & Anyway, If They're Half-Decent, why Would I Be Audited?
Do I Really need It?
Well, do you have negatively-geared rental property (translation: you have to top up the mortgage)? Are you making tax losses every year from your rental? In that case, don't you think that IRD might like to look more closely at whom it is that is always claiming losses and that they are always refunding money to?
If you're a "she'll be right mate", fly by the seat of your pants, throw caution to the wind sort of investor, then maybe this ain't for you. On the other hand, if you take a more cautious measured approach to your investments, and would like some peace of mind, then this product is a good choice for you.
But, don't just take our word for it. MYOB think audit insurance is wise. Here's a comment from their website:
It’s getting to the point that unless you spent all day on your work book, payroll and IRD returns, you might still get it wrong occasionally. So accept this and take out some tax audit insurance, which will pay the fees of your accountant to give you the best possible protection from the IRD.
Once the IRD starts an audit, they need to justify their decision to pick on you, so they don’t give in easily. Tax audit insurance is affordable and available through a good accountant, so if your accountant doesn’t offer this, change to one who does.
Bold print ours. See here for the full article.*
What Does It Cost & How Do I Get It?
Contact us or your current accountant for a quote.
How much would it normally cost for EpsomTax.com Limited to compile reports for IRD if an audit was to take place?
This question is similar to how long is a piece of string. Your costs - including the costs of any professionals you hire to respond to the enquiry - would vary on the situation and complexity of the audit, review or investigation. The good part is that there is no excess and no minimum amount that you could claim and this insurance covers any audits re any previously lodged returns irrespective of whoever may have lodged that return. If a professional such as a tax lawyer gets involved, could you imagine their fees?
Does the cover amount of 10k only cover EpsomTax.com Limited's fees?
The cover is for all professional fees that would have normally been incurred by you for us to respond to the audit, up to this amount.
Could part of this cover pay the IRD for if money is owed after the audit process?
This insurance only covers for professional fees. No fees or penalties are covered.
When does the IRD audit? Any particular time of year? Who would they normally target to audit?
The IRD specialise in random audits, although from time to time they put stuff in the media about some industry they may be focusing upon. Hence such events could happen at any time.
Case Study 1
A company based in Tauranga was investigated by Inland Revenue and asked for copies of their Financial Statement, Tax Returns and Tax Reconciliation.
End result: All of the $11,282.42 of costs were covered by Audit Shield.
Case Study 2
A business in Auckland was selected for a review of compliance risks which were identified within their industry and expenses claimed.
End result: The total of $7,962.60 was covered by Audit Shield.
Case Study 3
An investor was selected for a review of their lodged Income Tax in Auckland.
End result: The complete amount of $2,511.60 was covered by Audit Shield.
Case Study 4
A GST return review for a business in Wellington equated to $11,500.
End result: Every cent of the $11,500 was covered by Audit Shield.
* Referring to this article does not constitute an endorsement of EpsomTax.com or this website by MYOB.
Accounting for your rental residential investment property; general taxation advice.