Assessment of Tax Returns by the Australian Taxation Office

Last updated 4 August 2016

Once a return is lodged, the Commissioner of Taxation assesses the amount of tax payable, based on the information supplied in the return and any other relevant information in the possession of the Australian Taxation Office (ATO). A notice of assessment is then posted to the taxpayer.

Payments and refunds

The notice of assessment will show whether the taxpayer owes tax or is entitled to a refund. If a refund is due, a cheque will accompany the assessment notice, or be paid by EFT.

Pay as you go

The pay as you go (PAYG) system has two main components, PAYG instalments and PAYG withholding. Under this system, taxpayers will generally make payments on a quarterly basis, based on their current trading and investment conditions. It does not affect the due date for lodgement of a taxpayer’s income tax return. The rationale behind the legislation is to bring forward the payment of tax liability to the year the income was earned. PAYG instalments that are required to be paid quarterly will be due 21 days after the end of the preceding quarter.

Complex problems regarding the PAYG system should be directed to a tax adviser.

Due date for tax payments

Tax is due for payment on the date specified on the notice of assessment. Upon application, the commissioner may grant an extension of time for payment or permit payment to be made by instalments, though interest will usually be charged.

Investigations

The ATO may investigate taxpayers in two ways.

Sometimes the commissioner will ask questions in writing and ask for a written reply.

Alternatively, investigators from the ATO may seek to interview people about their tax obligations. Interviews will be recorded or may be done by two ATO people who will afterwards agree on their version of what occurred. For this reason, it is important for interviewees to also have someone else present or to record what is said. If recorded by the ATO, make sure you receive your labelled copy of the voice recording.

People who are not sure of the answer to any question during such an interview should ask the investigators to put it in writing and undertake to give a written reply as soon as possible. The commissioner has power to require individuals to give evidence on oath, which requires an answer to be given, but the ATO does not normally exercise that power.

Relief from paying tax

Total or partial release from liability to pay tax is available under the taxation system.

Relief is available to people who can show that payment of the full amount of tax owing would entail serious hardship. Application forms are available from the ATO, and it is important that the taxpayer provides full details and be up to date with their tax returns.