The Ultimate Guide To Navigating an ATO Audit

No one likes the idea of hearing that they are going to be audited by the Australian Tax Office. But with this guide, you have everything you need to know to go through the process with confidence. Our team of expert tax accountants created this article based on real questions asked to them by business owners who were being audited. Remember to seek the advice of a trusted tax accountant if you are unsure about anything. Now, let’s explore everything you need to know to help you navigate an audit.

What happens if I ignore the ATO audit letter?
Typically, the ATO will adjust your income tax assessment to reflect the information they have. For example, if you do not respond to an audit in relation to work related expenses you will more than likely have those deductions removed and the ATO may apply penalties.

If you have inadvertently missed an ATO audit, because you changed addresses without informing the ATO for example, this can be corrected by objecting to the audit decision. Get in touch with a member of My Tax Accountant to receive professional advice prior to lodging an objection.

Can I get more time to respond?
Typically, yes. If you need more time to gather the information, then the ATO may grant you an extension on the time limit to respond. It’s important that you communicate with the ATO on all time extensions.

How long do I need to keep my evidence after lodging my return and getting my refund?

Most ATO audits are conducted prior to your refund being issued, or within approximately two years. It’s best to keep your evidence until the full audit has been complete and your return has been processed. It’s worth noting that there are many exceptions to these general time frames, the ATO will inform you directly about their requirements.  

Should I get on the phone and have a good conversation with the ATO auditor?
Discussing your issues with an auditor is not a good strategy to effectively clear up misunderstandings. We recommend keeping your verbal conversation brief and your written communication clear.

What are my rights?
The Taxpayers’ Charter is an ATO publication which describes, amongst other things, what you can expect from the ATO if you are selected for a review or audit. For example, the ATO must conduct reviews and audits in an impartial, fair, reasonable and professional manner. Familiarising yourself with what to expect is recommended.

Will I go to prison?
If you have made an honest mistake, you will not go to prison. While some people receive criminal records for tax related offences, almost all do not.

Will I always be subject to penalties?

No, not always. If you have made an honest mistake and have a good compliance history, you will most likely not be subjected to penalties. This will depend on many factors, including your tax knowledge, your actions during audit, and what the tax shortfall is in relation to.

Will I have to pay my tax accountant to represent me during an audit?

This depends on whether you have audit insurance, whether you have chosen to represent yourself, or whether the tax accountant offers their services for free during audit as a part of your initial tax return fee.

It is prudent to be upfront with your tax accountant and make a risk-based decision at the outset of an audit. Even though an upfront voluntary disclosure may not give you the most ideal tax outcome and force you to concede on some points, it may work out to be the most economical way to resolve the audit.

If an audit is completed and I disagree with the decision, is there anything else I can do?
Yes, an objection can be lodged if you disagree with the audit decision. You may disagree with the way the law was applied, or you may just want to supply more information to change the decision.

Partnering with a professional tax accountant
Hopefully the questions above cover any issues you might have. For any other queries you might have regarding tax audit advice to tax return agents, get in touch with one of our expert tax consultants who are ready and able to help you navigate any issue.

My Tax Accountant has years of experience, not only as tax return agents in Melbourne, but in providing tax dispute advice and guidance to individuals and businesses. We offer affordable tax services and flexible communication options to meet you when you’re available. Book a consultation with us today.

Disclaimer: This document should not be interpreted as tax advice. All information is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.