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’ in ‘Tax returns‘) 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’ in ‘Penalties, interest charges and offences relating to tax returns‘) from the date tax became due and payable under the original assessment for the year in question.