The Australian Taxation Office (ATO) seeks to conduct audits with a high level of transparency. At the outset, it will clearly outline to you the advantages of, and procedures for, making voluntary disclosures, and the circumstances in which you can expect it to use its formal access powers.
Explore the ATO’s cooperative approach, and the formal powers it has available.
The ATO’s cooperative approach
The ATO generally prefers to contact you to develop a good working relationship prior to making information requests.
It will be straightforward about why you have come under scrutiny, encouraging cooperation so that audits can be completed as quickly as possible, minimising cost and disruption. This may involve you voluntarily disclosing errors or providing information that may assist the proceedings.
The ATO will also outline the types of documents that will likely be required to support your claims, including physical or electronic documents that evidence an intention, election, choice, estimate, determination, or calculation. For complex matters, information held by third parties may be required.
A cooperative approach does not usually involve the use of the ATO’s formal powers. However, formal powers may be used at the outset in certain higher-risk situations, including:
- Where the ATO is requesting information from third parties (including related parties).
- Where you have no access or are being denied access to the information held by another party or third party.
- Cases involving potential tax avoidance.
- Where you have a history of not voluntarily providing the required information.
- Where you request that the ATO use formal powers.
Formal powers available to the ATO
The ATO’s formal powers fall into two broad categories:
- Notice powers require you to give information, attend and give evidence or produce documents.
- Access powers give the ATO full and free access to places, books, and documents. They also require reasonable assistance be given to ATO officers in exercising these powers. The ATO will generally arrange the exercise of these powers with you in advance except in exceptional circumstances, such as where there is a reasonable suspicion of risk of destruction of documents or more serious breaches of the law.
While the ATO has a range of formal powers available which can be used to access information as part of an audit, it generally prefers to pursue a cooperative approach which typically does not involve the use of these powers. The benefits of a cooperative approach include that audits can be resolved as efficiently as possible and minimise disruption. However, in high-risk situations such as cases involving potential tax avoidance, formal powers may be used by the ATO at the outset.