Australian individuals made a combined 14,677,545 tax deductions and companies claimed an average of $2,886,057 in expenses in the 2018–19 financial year1, the most recent year for which we have Australian Taxation Office data. In other words, tax preparation is big business.
With that much work happening, it’s no wonder mistakes are made.
Sometimes those mistakes have what feels like outsized effects.
For example, imagine if during the hectic atmosphere created by the end of the financial year in 2021, an accounting business accidentally lodged a client’s tax return late without requesting an extension.
In normal circumstances, this wouldn’t be an issue, but the circumstances aren’t normal. Because of the eligibility requirements of Australia’s JobKeeper and the amount of money the federal government support made available, such a small error can have large costs.
While this scenario is hypothetical, situations very much like it have happened. It’s one reason – even though professional indemnity insurance for CAs is compulsory – it’s worth discussing your cover with an experienced broker. It’s important to understand your level of risk and be able to manage it appropriately. Another reason is that claims can be legally convoluted.
Filing a tax return late is a relatively simple situation compared with filing one with incorrect figures. Even in cases in which an accounting business is not found to be negligent, it can take many months to sort through the issue. During this time, legal and auditing fees can mount quickly. Indeed, in the most complex cases, what starts as a relatively simple accounting error can take years to resolve.
A famous example (outside of the world of tax) was a corporate advisory firm that was eventually ordered to pay $5.5 million to a client over a tender for a government contract. An Australian Financial Review article2 about the case states that the trial would not have occurred if the company had not made an amortisation error. What’s more, the judge is quoted as saying the error would have been found had the firm conducted (as it typically did) a “simple quality assurance review”. The error was made in 2013 and first noticed by the client in 2014. There were four separate Federal Court decisions, the last of which was handed down in 2019.
Having the right insurance in place to manage your risk should any claim arise is crucial. To get the best coverage for your accounting business, you need a broker with experience. Aon has been working with accountants for many years, and been partner of the CA ANZ Member Benefits Program for seven. Our claims teams are able to leverage long-standing relationships with insurers to advocate on behalf of our customers and seek the best outcome that we can, no matter the situation.
Find out more:
Aon is the Australian general insurance partner of the CA ANZ Member Benefits Program and provides exclusive benefits to CA ANZ members. To find out more and get a quote, go to https://business-insurance.aon.com.au/aon-partners/chartered-accountants-anz.
© 2022 Aon Risk Services Australia Limited ABN 17 000 434 720 AFSL 241141 (Aon)
This information is intended to provide general insurance related information only. It is not intended to be comprehensive, nor does it, or should it (under any circumstances) be construed as constituting legal advice. You should seek independent legal or other professional advice before acting or relying on any of the content of this information. Aon will not be responsible for any loss, damage, cost or expense you or anyone else incurs in reliance on or use of any information contained in this document.