Tax Audits
What is a tax audit?
A tax audit is a formal examination of a taxpayer's tax affairs to see if the taxpayer has complied with the tax laws. It is not singular in process and can apply to both questions of assessable income and deductions and tax offsets claimed in a taxpayers tax return.
How Can an Audit Arise?
Taxpayers will be surprised to know that a great number of tax audits begin with a ‘dob in’. Others arise from statistical analysis and measurement anomalies or simply a failure to declare income from traceable sources. Not all enquiries lead to an Audit, many can in fact be easily explained and settled without incurring further costs. Where upon an enquiry being made by the ATO the taxpayer realises an error, a ‘voluntary disclosure’ is an effective method to mitigate costs and minimise penalties and time cost for both the taxpayer and the ATO.
How does it begin?
Most often the Audit processes begins well before the first written correspondence (i.e. through the process of statistical analysis and measurement anomalies or simply a failure to declare income from traceable sources). Often it is preceded with a phone call to your Tax agent or direct to the taxpayer. Thereafter the Audit process usually begins with a cover letter setting out the ATO's enquiry.
Of late the ATO has commenced the practice of writing to SME’s and family groups requesting they complete a lengthy questionnaire relating to the owners business tax affairs and that of their family members. Currently this practice is under review however the ATO has not discontinued its use.
Compliance activities
The Tax Office adopts a risk management approach to ensure compliance with the tax laws. The Tax Office's compliance program for 2009-10 is available on its website
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