Tax Audit Insurance - What Is It and Do I Need It?

August 3, 2018

The Inland Revenue maintains that this move to a more technologically driven system will bring them closer to their customers and streamline their processes. There are concerns that less human interaction may lead to more issues for taxpayers.

In Australia there was a widely criticized ‘robo-debt’ error as a result of automated processing. Centrelink (a government agency) had declarations matched with tax returns, resulting in more than 20,000 letters sent to taxpayers with perceived discrepancies relating to their government benefits declarations. At least 20% of the recipients were later found to owe nothing. Whilst the letters were clearly questionable, the onus rested on individuals to allocate time and resources to clear any perceived wrong doing.

The Inland Revenue will face a challenge to ensure similar issues do not arise in New Zealand. There are thousands of discrepancies with tax statements each year, some are innocent and others are not. As was seen in Australia, the onus remains on the taxpayers, and their accountants, to correct the perceived discrepancy.

Anyone selected for an audit or review, can expect this to be expensive, time consuming and without warning. The Inland Revenue can choose to investigate anyone, even those meeting tax obligations accurately and on time.

The purchase of Audit Insurance is a great way to mitigate the risk of audit costs. This product covers the cost of professional accountancy fees incurred during an audit and removes the stress and anxiety from the entire audit process.

Even if the review or audit finds no errors, accountancy costs in dealing with enquiries can be significant.  Audit Insurance provides a simple and economical solution to manage this financial risk.   Audit insurance specifically covers: 

  • Income Tax
  • GST
  • PAYE
  • Computer Tax Audits
  • FBT
  • Recordkeeping
  • Imputation Credit Account
  • Resident Withholding Tax
  • Dividend Withholding Tax
  • Any query of any lodged return where the client is compelled to respond or act

In conjunction with Audit Shield, Nexia NZ offer an Audit Insurance product. If you are interested in learning more about this product, or obtaining a quote please contact your Nexia NZ Partner.

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