What Should You Do If the ATO Contacts You?

Receiving a letter, email or telephone call from the Australian Taxation Office can be unsettling. However, contact from the ATO does not automatically mean that you have done something wrong.

The ATO may be seeking additional information, checking figures reported in a tax return, reviewing a transaction or investigating whether Australian taxation law has been applied correctly.

What you do next can be important. Information supplied during an ATO review, audit or investigation may affect the scope of the enquiry, any amended assessment, potential penalties and your future rights of objection or appeal.

Before responding, take time to understand what the ATO is asking, gather the relevant records and consider whether you require specialist legal advice.

Chris Garlick provides independent advice and representation in complex ⁠ATO tax disputes, reviews, audits and investigations throughout Australia.

Why Has the ATO Contacted You?

The ATO may contact an individual, business, company, trustee or professional adviser for many reasons.

Common reasons include:

• Discrepancies between a tax return and information held by the ATO
• Unreported or incorrectly reported income
• Capital gains tax issues
• Business activity statement or GST concerns
• Unusual deductions or expenses
• Trust distributions
• Division 7A arrangements
• Overseas income or investments
• Tax residency concerns
• Cryptocurrency transactions
• Property sales or developments
• Related-party transactions
• Information received from banks, employers or government agencies

Some enquiries are relatively limited. Others may develop into detailed examinations involving several income years, multiple entities or technically complex taxation issues.

The ⁠Australian Taxation Office administers Australia’s taxation, superannuation and excise systems and may examine information to determine whether taxpayers are complying with the law.

ATO Review, Audit or Investigation: What Is the Difference?

The language used by the ATO can help indicate how serious or advanced the matter may be.

ATO review

A review is generally an initial examination of a particular issue or risk. The ATO may ask for documents, explanations or calculations to determine whether further action is required.

A review may conclude without any adjustment. However, it may also identify issues that lead to a more extensive audit.

ATO audit

An audit is usually a more detailed examination of a taxpayer’s affairs. It may involve reviewing financial records, contracts, correspondence, bank statements, transaction documents, tax returns and advice received from professional advisers.

At the conclusion of an audit, the ATO may:

• Accept the taxpayer’s position
• Propose adjustments
• Issue amended assessments
• Impose penalties and interest
• Consider further compliance or recovery action

ATO investigation

An investigation may involve suspected serious non-compliance, deliberate conduct, false or misleading statements, tax avoidance arrangements or possible fraud.

Investigations can create significant legal, financial and reputational risks. They should not be treated as routine correspondence.

The exact label used by the ATO is not the only consideration. A letter described as an information request may still concern an issue with substantial financial consequences.

What Should You Do If the ATO Contacts You?

1. Confirm that the contact is genuine

Tax-related scams are common. Do not provide personal information, passwords, banking details or identity documents until you are satisfied that the communication is genuine.

Check the sender’s details, reference numbers and contact information. Where necessary, contact the ATO independently using official contact details rather than relying on the telephone number or link contained in an unexpected message.

2. Read the correspondence carefully

Identify:

• What information the ATO is requesting
• Which tax years are involved
• Which entities or transactions are being examined
• The stated reason for the enquiry
• The deadline for responding
• Whether the ATO is proposing an adjustment
• Whether review or objection rights are mentioned

Do not assume that a request is simple merely because the letter is short. One question may raise issues affecting several transactions, entities or income years.

3. Preserve all relevant documents

Gather and preserve records connected with the enquiry, including:

• Tax returns and financial statements
• Bank statements
• Contracts and agreements
• Invoices and receipts
• Trust deeds and distribution resolutions
• Company records
• Loan documents
• Property settlement records
• Emails and correspondence
• Accounting workpapers
• Advice received from accountants, solicitors or other advisers
• Records relating to overseas income, assets or transactions

Do not alter, reconstruct or dispose of documents after receiving an ATO enquiry.

Where records are incomplete, obtain advice before attempting to recreate them or provide estimates.

4. Do not respond impulsively

A rushed response can create contradictions, provide unnecessary information or unintentionally broaden the ATO’s enquiry.

Before responding, consider:

• Whether the requested information is clear
• Whether additional time is reasonably required
• Whether the documents answer the question being asked
• Whether the response may affect another taxpayer or entity
• Whether legal professional privilege may apply to any material
• Whether the issue requires specialist taxation advice

A response should be accurate, complete and carefully confined to the issues raised.

5. Note every deadline

ATO correspondence commonly includes a date by which information must be supplied or action must be taken.

Missing a deadline can make the matter more difficult and may affect available review rights. If additional time is needed, a request should generally be made before the original deadline expires.

Taxpayers can object to many ATO decisions, but the applicable time limit can vary depending on the particular decision and circumstances. The ATO states that objection periods may range from 60 days to four years.

6. Speak with your accountant or tax adviser

Your accountant may hold important records and understand how the original return, transaction or structure was treated.

However, an ATO investigation or dispute can raise legal issues extending beyond routine tax compliance. These may include statutory interpretation, evidentiary questions, penalties, privilege, objection rights and litigation strategy.

Chris regularly works alongside accountants and solicitors where specialist taxation counsel is required.

Common Mistakes After Receiving an ATO Letter

Ignoring the correspondence

Ignoring an ATO enquiry rarely makes it disappear. The ATO may proceed using the information available to it, issue further notices or escalate the matter.

Telephoning without preparation

An informal telephone call can still result in information being recorded and relied upon.

Before discussing a complex matter, understand the relevant facts and decide who should communicate with the ATO.

Providing more information than requested

Supplying large quantities of irrelevant material can create new questions and expand the scope of the review.

The goal is not to conceal relevant information. The goal is to provide an accurate and properly considered response to the request actually made.

Guessing or speculating

Do not provide an answer merely because the ATO has requested a quick response.

Where facts are uncertain, records should be checked before any statement is made.

Assuming the accountant must handle everything

Accountants perform an essential role in taxation compliance and financial reporting. However, a serious dispute may also require legal analysis, preparation of submissions, advice about privilege and representation in objection or appeal proceedings.

Businesses facing an ATO enquiry can also obtain information about Chris Garlick’s ⁠business taxation advice.

Waiting until an amended assessment is issued

Early advice usually provides more room to influence the course of a matter.

Once the ATO has reached a concluded position, the taxpayer may need to pursue formal objection, review or appeal procedures.

When Should You Contact an ATO Investigation Lawyer?

Specialist legal advice should be considered where:

• The ATO alleges that income was omitted
• Significant deductions are being challenged
• The enquiry concerns several income years
• Multiple companies, trusts or related parties are involved
• The ATO is examining Division 7A arrangements
• The dispute concerns tax residency or foreign income
• The matter involves substantial penalties
• The ATO alleges intentional disregard or recklessness
• You have received an amended assessment
• You are considering lodging an objection
• The matter may proceed to the Administrative Review Tribunal or Federal Court
• You are concerned that information supplied may have wider legal consequences

Tax residency enquiries can be especially fact-sensitive. Individuals dealing with overseas relocation, foreign income or competing residency claims can read more about ⁠tax residency advice in Australia.

Can You Challenge an ATO Decision?

Many ATO decisions can be challenged through the taxation objection process.

A valid objection generally needs to identify the decision being challenged, explain why it is incorrect and provide the facts, evidence and legal grounds supporting the taxpayer’s position.

An objection should not simply state that the taxpayer disagrees. It should present a coherent case addressing the relevant legislation, evidence and ATO reasoning.

Depending on the outcome, further review may be available through the Administrative Review Tribunal or the Federal Court of Australia.

The Federal Court’s Taxation National Practice Area includes tax appeals, appeals involving questions of law from the Administrative Review Tribunal and proceedings connected with taxation disputes.

Because strict time limits may apply, legal advice should be obtained promptly after receiving an amended assessment, objection decision or other reviewable decision.

How Chris Garlick Can Assist

Chris Garlick provides specialist advice and representation in complex Australian taxation matters.

Assistance may include:

• Reviewing ATO correspondence
• Advising on the scope and significance of an enquiry
• Preparing responses to ATO information requests
• Examining the legal and factual basis of the ATO’s position
• Advising on evidence and documentation
• Preparing legal submissions
• Assisting accountants and solicitors during audits
• Advising on amended assessments and penalties
• Preparing taxation objections
• Developing settlement and dispute strategies
• Representing clients in taxation review and appeal proceedings
• Advising on Federal Court taxation litigation

Chris advises individuals, business owners, companies, trustees, accountants, solicitors and professional advisers throughout Australia.

Every taxation matter depends on its particular facts. Early advice may help identify the issues, protect available rights and prevent a manageable enquiry from becoming a much larger dispute.

Frequently Asked Questions

Does an ATO letter mean I am being audited?

Not necessarily. The ATO may be requesting clarification or conducting a preliminary review. However, any request concerning a material taxation issue should be taken seriously.

Should I answer the ATO immediately?

You should acknowledge and comply with valid deadlines, but you should not provide an unconsidered response. Review the request, collect the relevant documents and obtain advice where the issue is significant or unclear.

Can my accountant respond for me?

In many matters, an accountant can assist with records and compliance information. Where the enquiry raises complex legal issues, significant penalties or possible litigation, specialist legal advice may also be appropriate.

What happens if the ATO changes my assessment?

You may be able to lodge an objection. The correct process and time limit depend on the decision involved, so the assessment and accompanying reasons should be reviewed promptly.

Can an ATO dispute go to court?

Yes. Depending on the pathway and issues involved, taxation disputes may proceed through the objection process, the Administrative Review Tribunal or the Federal Court.

Can Chris work with my existing accountant or solicitor?

Yes. Chris regularly works collaboratively with accountants, solicitors and other professional advisers in complex taxation matters.

Speak With Chris Garlick

If you have received an ATO review letter, audit notice, information request, amended assessment or investigation correspondence, consider obtaining advice before providing a detailed response.

Chris Garlick provides independent taxation law advice and representation to clients throughout Australia.

⁠Contact Chris Garlick to discuss your circumstances and the most appropriate next step.

This article provides general information only and does not constitute legal or taxation advice. Every matter should be assessed according to its own facts and circumstances.