What does tax audit insurance cover?

Tax audit insurance may help reimburse accountant, registered tax agent or lawyer fees incurred to prepare for an ATO audit of your business. The fees need to be reasonably and necessarily incurred. It does not cover the tax itself, or any penalties, fines or interest.

Cover applies to the cost of responding, not the outcome. It is also called ATO audit insurance or tax investigation insurance. The purpose is to take the professional fee shock out of an audit you did not plan for. For background on how the product works and who may need it, see our guide on what tax audit insurance is and how it works. This article covers what is in, what is out, and how a claim runs.

What is covered and what is excluded?

Exact cover depends on the insurer and the policy wording. Always read the policy wording or Product Disclosure Statement, where applicable.

upcover arranges tax audit insurance for eligible Australian businesses.

What audits trigger tax audit cover?

Cover is generally triggered by an official audit, not by any contact from the ATO. That distinction matters more than most businesses expect.

ATO audits. Examples may include income tax, GST, fringe benefits tax, superannuation guarantee and record-keeping audits. A GST desk audit notice following a mismatch between your BAS and your sales records is one such trigger.

Other bodies with jurisdiction over taxation. Cover can also apply where a Commonwealth, state or territory department, body or agency with jurisdiction over taxation audits you. A state revenue office reviewing payroll tax, including contractor payments and grouping with related entities, is one example.

What is not a trigger. A risk review letter or a routine enquiry is generally not covered, even though it still creates work for your accountant. If the ATO writes asking you to check your BAS figures and no formal audit has started, the preparation work usually falls outside cover. Preparation work is generally covered only where you are legally required to respond to an official audit.

This is an important distinction. Being contacted is not the same as being audited.

Does it cover accountant and tax agent fees?

Cover applies to fees you incur in connection with a notified audit, up to the aggregate limit in your policy schedule:

• Accountant fees. Reviewing your books, explaining transactions and preparing a structured response with supporting documents.
• Registered tax agent fees. Pulling invoices, reconciling GST, answering the auditor's questions and lodging supporting material.
• Lawyer fees and costs. Where legal input is reasonably and necessarily required to respond to the audit.

Three mechanics are worth understanding before you claim. These reflect the cover arranged by upcover. Terms may differ between insurers, so check your own policy.

It works on a reimbursement basis. Eligible fees are reimbursed once they are incurred in connection with the audit. You pay your adviser and claim, rather than the insurer paying them directly.

The limit is an aggregate. Cover responds up to the aggregate limit shown in your schedule for the period of insurance. Once that limit is used, remaining fees are yours.

An excess applies to each claim. This applies to each and every loss giving rise to a claim, with the amount set out in your schedule.

If you do not currently use a registered agent, our article on whether a small business should get an accountant is worth a read. It matters here for a specific reason, covered next.

What are the tax audit insurance exclusions?

Four important exclusions to check.

Returns you prepared yourself. If the return under audit was not prepared by an accountant or registered tax agent, the audit can be excluded and the professional fees may not be covered. This catches out businesses that lodge their own BAS or returns and only engage an adviser once the ATO makes contact.

Audits you already knew about. Cover is not available if you or your tax agent knew about the audit before cover started. The audit generally needs to arise and be notified to the insurer during the policy period.

Tax, penalties, fines and interest. The outcome of the audit is not covered. That includes the additional tax, administrative penalties, and the ATO's general interest charge and shortfall interest charge. It’s worth noting that GIC and SIC incurred from 1 July 2025 are no longer tax-deductible, which raises their real cost.

Costs from being late. Fees and costs caused by late lodgement, late payment or late responses can be excluded. Responding to the auditor on time protects the claim as well as the relationship.

Notification, consent and approval requirements vary between policies. Some require the insurer to be told before fees are incurred. Check yours rather than assuming.

What other audit activity might a policy cover?

Beyond a standard ATO audit, some policies extend to other taxation matters. Availability varies by insurer, so treat these as questions to ask rather than standard inclusions:

• Payroll tax audits by a state or territory revenue office
• Land tax and stamp duty reviews
• Superannuation guarantee audits
• Fringe benefits tax audits
• An ATO or revenue-authority audit of a self-managed super fund, as distinct from the annual statutory SMSF audit, which is routine compliance and not an audit event

Tax audit cover is sometimes available as a section within a broader policy such as a business pack rather than on its own. Check whether you already hold it before arranging a separate policy.

What does a tax audit insurance claim look like?

The following are illustrative only. They do not represent real businesses, insurers or claims. Outcomes depend on the policy wording and the insurer's assessment.

Income tax audit. The ATO starts an income tax audit and asks for proof of deductions and business income. Your tax agent reviews the books, explains key transactions and prepares a response with supporting documents. Where the audit is notified during the policy period, the agent's fees may be reimbursed up to your limit, after the excess.

FBT audit. After you lodge your FBT return, the ATO commences an audit and asks for detail on car and entertainment benefits. Your accountant gathers logbooks and receipts, recalculates taxable values and responds. Accountant fees needed to prepare and respond may be reimbursed, subject to the limit and excess.

State payroll tax audit. A state revenue office reviews your payroll tax and questions contractor payments and grouping with related entities. Your accountant prepares payroll reports and contractor agreements, then joins calls with the auditor. Professional fees may be reimbursed where a body with jurisdiction over taxation conducts the audit and it is notified in the policy period.

GST desk audit. The ATO flags mismatches between your BAS and sales records and issues an audit notice. Your tax agent pulls invoices, reconciles GST and lodges supporting documents. Fees incurred to prepare for the notified audit may be reimbursed, up to your limit and after the excess.

How do you make a tax audit insurance claim?

Four steps, in order:

1. Notify the insurer as soon as you are aware. The audit generally needs to be notified during the policy period. Claims should be made in writing and handled in line with the notification requirements in your policy wording.
2. Provide the authority's correspondence. The audit notice or letter from the ATO or revenue office establishes that an official audit has commenced.
3. Check whether fees need approval before they are incurred. Notification, consent and approval requirements vary by policy.
4. Keep invoices and work records. Your adviser's invoices and a record of the work done support the reimbursement.

Full details are set out in your policy wording. upcover's claims page explains how to lodge.

About upcover

upcover is a digital-first insurance broker helping Australian small businesses arrange business insurance without the paperwork or phone queues. upcover arranges tax audit insurance in Australia for eligible businesses, with access to 80+ insurance partners.

• 70,000+ businesses covered across Australia.
• 4.9/5 customer rating.
• Certificate of Currency issued on policy confirmation for eligible policies.

upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance from selected insurers and does not compare all products in the market.

Before you request a quote, have these ready: your business structure and turnover, whether your returns are prepared by a registered agent, the limit you want, and confirmation that you are not already aware of an audit.

Get a quote for tax audit insurance

Tax audit insurance FAQs

What does tax audit insurance cover?

Accountant, registered tax agent or lawyer fees incurred to prepare for an ATO audit, up to the aggregate limit in your schedule and after the excess. It does not cover the tax, penalties, fines or interest.

Does tax audit insurance cover ATO penalties and interest?

No. The policy covers the cost of responding, not the outcome.

Does it cover an ATO risk review or a routine enquiry?

Generally not. Preparation work is typically covered only where you are legally required to respond to an official audit.

What if I prepared my own tax return?

If the return under audit was not prepared by an accountant or registered tax agent, the audit can be excluded and your fees may not be covered.

Does it cover an audit that started before I took out the policy?

No. The audit generally needs to arise and be notified during the policy period.

Does tax audit insurance cover state revenue office audits?

It can. Cover may apply where a Commonwealth, state or territory body with jurisdiction over taxation audits you. Payroll tax reviews are a common example.

Is tax audit insurance tax-deductible?

The premium may be deductible as a business expense, depending on your circumstances. Check with your accountant or registered tax agent.

‍

_{This article is general information only. It is not personal, tax or legal advice, and has been prepared without taking into account your objectives, financial situation or needs. Consult a registered tax agent about your circumstances, and read the relevant policy wording and Product Disclosure Statement before deciding on any insurance product. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}