The Australian Taxation Office (ATO) takes fraud and tax evasion investigations seriously, and it may amend assessment periods to ensure that this conduct is identified and dealt with.
Explore your rights and the ATO’s responsibilities, as outlined in its Law Administration Practice Statement.
ATO fraud and tax evasion investigations
The ATO will look at whether you:
- Knowingly made false or deceptive statements.
- Withheld information to influence a tax outcome.
- Failed to keep adequate records to support a tax audit.
- Intentionally omitted income from a tax return with no credible explanation.
If the ATO suspects fraud or tax evasion, they may amend your assessment beyond the normal time limits.
The ATO has a duty to make timely enquiries and assessments, and Australians are entitled to certainty and finality after a specified period regarding their tax liabilities.
However, where there has been fraud or tax evasion, a taxpayer may not be entitled to the benefits of these statutory time limits.
The ATO seeks to ensure that this amendment power is used appropriately, and it has the responsibility to inform taxpayers if they are being investigated for suspected fraud or tax evasion.
How are determinations of fraud or tax evasion made?
To form an opinion that there has been fraud or tax evasion, the ATO must exercise sound judgement and fairness. In its Practice Statement, the ATO states that this opinion should be formed only:
- By an executive or senior level officer.
- In accordance with ATO policies and practices.
- Bearing in mind the weight Parliament has placed on the benefits of certainty and fairness for taxpayers.
The ATO also seeks specialist assistance including:
- Consulting with the relevant technical advisory division.
- If the level of risk warrants it, seeking formal assistance from the Tax Counsel Network.
- Obtaining advice from the National Fraud or Evasion Advisory Panel.
- Reporting instances of suspected fraud to the Australian Institute of Criminology.
- If appropriate, referring cases to a specialist division that deals with cases involving “aggressive tax planning”, defined as “the use of transactions or arrangements that have little or no economic substance and are created predominantly to obtain a tax benefit not intended by the law.”
Tax discrepancies without fraud or tax evasion
If you underpay your tax due to an honest mistake, such as based on receiving an incorrect tax statement from your accountant, you will not have to pay a penalty or interest, but you will have to pay the correct amount of tax provided the time limits under the law allow it.