What actually happens in an ATO tax audit?

General advice only · AFSL 222640 · Global Mutual Funds Pty Ltd

The direct answer

Most ATO contact starts with a review or request for information, not a full audit. If it escalates, the ATO requests records, asks questions and issues a position. Where tax was underpaid, you pay the shortfall plus interest, and penalties may apply depending on behaviour — from no penalty for reasonable care up to 75% of the shortfall for intentional disregard.

What it depends on

The full answer depends on your specific circumstances. Here’s what matters.

Your records

You generally need to keep tax records for five years. Good records are the single biggest factor in how smoothly a review goes.

Your behaviour

Penalties scale with behaviour: lack of reasonable care, recklessness or intentional disregard. Voluntary disclosure before or early in an audit can significantly reduce penalties.

Amendment periods

The ATO can generally amend assessments within two years for most individuals and small businesses, and four years for others — longer or unlimited in cases of fraud or evasion.

The last 10%

What a qualified professional can add

The answer above covers the general position. Here’s where professional judgement — applied to YOUR specific situation — makes the difference.

Managing communication with the ATO on your behalf
Preparing a voluntary disclosure where appropriate
Objecting to or disputing a position you disagree with

Questions to ask before you engage one

If you decide to engage a professional, these questions help you evaluate whether they’re right for your situation.

Is this a review, an audit, or a data-matching letter?

What records will I need to provide, and by when?

Should we make a voluntary disclosure?

What are my objection rights if I disagree?

Your next step

If you receive an ATO letter, do not ignore it. Note the deadline, gather the records requested, and contact your registered tax agent before responding.

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