The Law Handbook 2024

400 Section 5: Managing your money additional tax, this will be indicated on the notice, along with a date by which it must be paid. Assessment of your tax return Once you lodge your return, the ATO assesses the amount of tax payable, based on the information you supplied in the return and on any other information in the ATO’s possession. Such information may, for example, consist of computer lists of amounts you received as interest and dividends from banks, building societies and public companies, which the ATO compares with returns of individuals. Any failure to disclose is likely to be detected. The risk of detection has increased significantly due to the increased reliance by the ATO on computerisation of records. For instance, as noted above, taxpayers using myTax will find that their returns are pre-filled with information. The system of self-assessment is not fully in place for individual taxpayers. That is, it is still the ATO that issues assessments (see ‘Filing your tax return’, above) based on information you provide. This contrasts with the position of companies, where no notice of assessment is issued. Instead, the tax legislation now deems an assessment of the appropriate amount of tax due to have been made either on the final date for payment of the tax or when the return was lodged, whichever is the later. The ATO possesses broad powers to obtain tax- related information (e.g. access to buildings, places, books, documents and other papers for the purposes of the Acts) and to require any person to provide any information that is required. If you do not lodge a tax return, the Tax Commissioner has the power to issue an assessment based upon the Tax Commissioner’s judgment of your taxable income. The Tax Commissioner also has the power, subject to certain restrictions including time restrictions, to amend assessments previously made. Amendments of prior assessments are often made as a result of audits being conducted. In addition to any penalties that may be imposed in relation to any tax shortfall, an interest penalty will also be payable on the amount of the tax shortfall (see ‘Tax shortfall provisions’, below) from the date tax became due and payable under the original assessment for the year in question. Queries: Private rulings and oral rulings If you are unsure about the tax treatment of various past or future receipts or expenditure, you may apply to the ATO for a (written) private ruling or an oral ruling . You are entitled to rely on the ruling; the ruling binds the ATO to the opinion expressed. However, you are not entitled to rely on a private ruling that has been issued to a different taxpayer. When faced with an unfavourable private ruling, you should not ignore it and treat the receipt or expenditure differently to how it is treated in the ruling. To do so may expose you to penalties. You may appeal an unfavourable private ruling to the Administrative Appeals Tribunal ( AAT ) or the Federal Court. The Australian Government has announced that it will abolish the AAT and establish a new federal administrative review body, to be named the Administrative Review Tribunal ( ART ). Oral and private rulings are provided free of charge, but private rulings can take time to be issued by the ATO. Essentially, they provide a cheap alternative to advice from legal professionals. However, there are advantages and disadvantages to the binding nature of such rulings both on you and the ATO. If you have simple tax affairs and you have a simple tax inquiry, you can apply to the Tax Commissioner for an oral ruling, either in person at an ATO branch office or over the phone. If your inquiry is more complex, or you are dissatisfied with an oral ruling, you may apply for a (written) private ruling. An application form is available from the ATO’s website. Penalties, interest charges and offences relating to tax returns When can penalties apply? If you have not complied with your tax obligations, you may have to pay penalties and interest charges. The penalties can be severe, particularly for deliberate tax evasion. Penalties apply in addition to the ordinary tax payable, rather than in substitution for tax. The ATO may reduce or remit penalties and interest, depending on individual circumstances. Two of the more common actions are: