Assessment and queries to the ATO

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Once you lodge your return, the ATO assesses the amount of tax payable, based on the information you supplied in the return and on any other information in the ATO’s possession. Such information may, for example, consist of computer lists of amounts you received as interest and dividends from banks, building societies and public companies, which the ATO compares with returns of individuals. Any failure to disclose is likely to be detected. The risk of detection has increased significantly due to the increased reliance by the ATO on computerisation of records. For instance, as noted above, taxpayers will find that their returns lodged by e-tax will be pre-filled by the ATO with information available to it.

The system of self-assessment is still not fully in place for individual taxpayers. That is, it is still the ATO which issues assessments (seeFiling your tax return”) based on information you provide. This contrasts with the position of companies, where no notice of assessment is issued. Instead, the tax legislation now deems an assessment of the appropriate amount of tax due to have been made either on the final date for payment of the tax or when the return was lodged, whichever is the later.

The ATO also possesses broad powers to obtain tax-related information, such as access to buildings, places, books, documents and other papers for the purposes of the Acts, as well as being able to require any person to furnish any such information as may be required.

If you do not lodge a tax return, the Commissioner has the power to issue an assessment based upon the Commissioner’s judgment of your taxable income.

The Commissioner also has the power, subject to certain restrictions including time restrictions, to amend assessments previously made. Amendments of prior assessments are often made as a result of audits being conducted. In addition to any penalties that may be imposed in relation to any tax shortfall, an interest penalty will also be payable on the amount of the tax shortfall (seeTax shortfall provisions”) from the date tax became due and payable under the original assessment for the year in question.