 Each year, thousands of public practice accountants across Australia rely on Audit Shield to manage the financial risk of audit activity initiated by the Australian Taxation Office (ATO) and other government revenue authorities. The claims submitted through Audit Shield offer a unique lens into the types of audits being initiated. By examining the frequency and nature of these claims, we gain insights into where audit attention is intensifying, where it’s easing, and how compliance behaviours are evolving. This article presents a comprehensive analysis of Audit Shield claims activity from 1 July 2024 to 30 June 2025, comparing it with the previous financial year to highlight notable shifts. Drawing on data submitted by firms nationwide, it explores the most common audit categories, emerging trends, and state-level differences. The aim is to provide a clear and practical overview of the audit landscape, helping accountants anticipate risk and better support their clients in a changing regulatory environment. The five most common Audit Shield claims activity categories, compiled by the Accountancy Insurance claims team from 1 July 2024 to 30 June 2025 were:
 Payroll Tax Investigations (All States): Payroll Tax Investigations (All States) remains the most frequent audit activity category for two consecutive years accounting for 14.73% of the total claims from 1 July 2024 to 30 June 2025. This represents a slight increase from the previous year, where Payroll Tax Investigations (All States) was 14.64%. This consistency suggests continued scrutiny by state revenue offices, likely driven by evolving employment structures and cross-border workforce arrangements. When analysing the total activity within the category for each state, we compared the period from 1 July 2023 to 30 June 2024 with the period from 1 July 2024 to 30 June 2025. These were the results:
Issues identified in Payroll Tax Investigations:
Claim proportion (frequency) 1 July 2024 to 30 June 2025: Payroll Tax Investigations (All States) accounted for 14.73% of all Accountancy Insurance claims. Income Tax (Full/ General/Combined) Audits and Reviews: Income Tax (Full/ General/Combined) audits and reviews made up 11.60% of the total claims from 1 July 2024 to 30 June 2025. When comparing the period from 1 July 2023 to 30 June 2024 with the period from 1 July 2024 to 30 June 2025, this category rose from 9.25% to 11.60%, moving from fifth to second place. The increase may reflect broader ATO initiatives targeting general income tax compliance, especially among individuals and small businesses with diverse income sources. Claim proportion (frequency) 1 July 2024 to 30 June 2025: Income Tax (Full/ General/ Combined) Audits and Reviews accounted for 11.60% of all Accountancy Insurance claims. BAS (Pre & Post Assessment) Audits and Reviews: New to the top five in 2024–2025, BAS (Pre & Post Assessment) audits and reviews climbed to 10.20%, indicating heightened ATO focus on GST reporting accuracy and lodgement behaviour. Advancements in data-matching and real-time reporting technologies have significantly bolstered the ATO's ability to detect discrepancies and non-compliance. The ATO now utilises AI-driven systems to analyse vast amounts of data, enabling the identification of irregularities in GST reporting more efficiently. This technological capability supports the ATO's proactive approach to compliance and audit activities. Another emerging field which is supporting the faster detection of discrepancies in reported sales and purchases is e-invoicing. Business clients of accounting firms should be aware that the ATO's enhanced capabilities may lead to increased audits and reviews, especially if inconsistencies are detected in BAS submissions. Ensuring accurate and timely reporting, along with robust internal controls, is crucial to mitigate the risk of audit activity. Claim proportion (frequency) 1 July 2024 to 30 June 2025: BAS (Pre & Post Assessment) Audits and Reviews accounted for 10.20% of all Accountancy Insurance claims. Income Tax (Rental Property) Audits and Reviews: Another new entrant into the top five Audit Shield claim category list is Income Tax (Rental Property) audits and reviews which accounted for 8.96% of all claim activity. This also is consistent with increased ATO interest in property-related deductions and income declarations. With property investment remaining popular, this area is likely to stay under close watch. Common issues in this category include overclaimed deductions, insufficient documentation, and failure to declare rental income. This has prompted the ATO to enhance its data-matching capabilities, cross-referencing information from various sources such as banks, land titles, landlord insurance policies and rental bond data to identify discrepancies. Claim proportion (frequency) 1 July 2024 to 30 June 2025: Income Tax (Rental Property) Audits and Reviews accounted for 8.96% of all Accountancy Insurance claims. Income Tax (Other Specific) Audits and Reviews: Income Tax (Other Specific) audits and reviews saw a slight decrease, from 9.78% in the period 1 July 2023 to 30 June 2024, to 8.63% in the period 1 July 2024 to 30 June 2025. Despite the decrease, this category remained in the top five. It covers a wide range of targeted income tax issues that require detailed ATO scrutiny. These may include audits and reviews relating to the Research & Development Tax Offset, Non-Commercial Losses, Temporary Full Expensing Claims, Trust Distribution Compliance, Personal Services Income, and Professional Firms Profit Allocation. Claim proportion (frequency) 1 July 2024 to 30 June 2025: Income Tax (Other Specific) Audits and Reviews for 8.63% of all Accountancy Insurance claims. Audit activity outside of the accountant’s control: Certain audit activities often fall outside of the control of the accountant, particularly when the client prepares and lodges their own returns. These include audits and reviews by the ATO and other government revenue authorities for:
Other observation: Employer Obligation Claims Decline: Audit Shield claims related to Employer Obligations (PAYG/SG/FBT) audits and reviews, particularly Superannuation Guarantee (SG) audits have declined. This category dropped from 10.21% in 1 July 2023 to 30 June 2024 to 6.64% in the period from 1 July 2024 to 30 June 2025. This decrease is likely attributed to a change in the ATO’s compliance approach. Using the data that is provided to the ATO via the Single Touch Payroll reporting then instead of proceeding directly to an official review or audit, the ATO is increasingly requiring employers to prepare and lodge their outstanding Superannuation Guarantee Charge statements as a result of the apparent late payment, underpayment or nonpayment of their superannuation guarantee contributions by the due dates. This represents a move away from traditional audit activity. In essence, employers are now increasingly being instructed to simply complete their overdue compliance paperwork and are not being audited, at that stage, in the conventional sense. As a result, claims related to Employer Obligations (PAYG/SG/FBT) have declined. Accountancy Insurance: Since 2003, Accountancy Insurance has been a trusted partner for thousands of accounting firms, providing specialised insurance solutions to meet the unique needs of the profession. We understand the complexities of the accounting landscape, from increasing compliance obligations to the ever-present risks posed by tax audits, professional liability, and cyber threats. Our goal is to ensure accounting professionals can operate with confidence, knowing they have the right protection in place. As the leading provider of tax audit insurance, we proudly support firms across Australia with Audit Shield, offering a reliable safety net against the rising costs associated with responding to audits and reviews initiated by the Australian Taxation Office and other government revenue authorities. Our latest enhancements to Audit Shield provide even greater flexibility and broader coverage to meet the evolving needs of accounting firms and their clients. In addition to tax audit insurance, we offer comprehensive professional indemnity insurance through PI Shield and industry-leading cyber insurance with Cyber Shield. In today's rapidly evolving landscape, our tailored solutions provide accountants, bookkeepers, BAS agents and tax agents with essential coverage specifically to their needs. For more information get in touch with the team here: 1300 650 758 | [email protected] Thanks to our friends at Accountancy Insurance for providing us with this article.
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AuthorClarity Street was conceived from years of engaging with Accounting firms on a daily basis and a constant desire to make Accounting firms & SME’s more efficient and profitable. Archives
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