The Australian Taxation Office conducts various types of tax and compliance audits when it deems that a more extensive information of an issue is necessary. The complexity of these audits can be varied from a very basic question to a highly extensive investigation.
Sometimes the process starts with a basic review than can lead to an audit in a later stage. In many cases, the audit period changes between 2 to 4 years, however, the ATO can go back as many years as needed, if there is a suspect of fraud or evasion.
The ATO states that they will be transparent about the following aspects of an Audit:
- Scope, periods under audit and expected completion date
- ATO's risk hypothesis and information required to assess the hypothesis
- Choice of channel to provide information to ATO
- How audit will be conducted (key milestones and relevant guidelines)
- Advantages of, and procedures for, making voluntary disclosures
- Expectations from individuals/businesses when information has been requested for records
- Circumstances in which ATO can be expected to use their formal powers
Cooperating with the ATO's requests is essential. If there is a lack of cooperation, then the ATO can use their formal powers to access the information they are seeking:
- Notice powers: Require you to give information, attend and give evidence or produce documents
- Access powers: Give free access to the ATO to all places, books and documents and require that assistance be given to ATO's officers to exercise their powers.
Cooperation makes this process much easier for both parties as a lack of cooperation can be significantly costly as ATO can easily overpower it and conduct the audit in their discretion.
Our experience shows that the taxpayers should not deal with the ATO by themselves. We strongly recommend involving a tax lawyer as soon as possible.
This is especially necessary if the taxpayer is invited to an interview by the ATO. Even if the interview environment is much more friendly than a real courtroom, anything that is said and done in that meeting still constitutes evidence in the audit process.