An Accounting firm in Western Sydney with 5 staff, has been covered for a $221 000 payment after the Tax Office fined a client.
The firm was insured with a Professional Indemnity Policy to the value of $2 million dollars with DUAL. Missing capital gains in a client’s tax return led to a claim that could have debilitated the insured without the correct cover.
The Insured was engaged by a husband and wife to complete tax returns for their 2012, 2013 and 2014 Financial Years. The Insured compiled all of the relevant information from its clients and lodged the returns. Some months later the Insured received a notice from the ATO advising they had failed to include the capital gains they had received from selling an investment property in the 2013 Financial Year, and the Insured was required to pay $221,211.26 comprising capital gains plus penalties and interest. The couple made a claim against an Insured accountant for failure to correctly complete their tax returns.
The tax returns were prepared by the Insured and in conjunction with the couple who reviewed the returns prior to submitting to the ATO. For this reason, it was determined that there was some exposure on the part of the insured accountant as well as the client, so the claim was settled on a commercial basis at mediation for the amount of $180,000 plus $25,000 in defence costs.