ATO audits, reviews and objections

An ATO audit is a formal examination of your tax affairs by the Australian Taxation Office, and it can end in amended assessments, penalties and interest. As tax dispute lawyers, we act for businesses, trusts, SMSFs and individuals in income tax, GST and other ATO audits, reviews, objections and appeals. We aim to resolve matters early and practically, without unnecessary conflict.

If an ATO audit letter has arrived, how you respond from that point shapes the result. Our team includes lawyers and a Chartered Accountant, and we work alongside your accountant, not against them.

Is it an ATO review or an audit?

The ATO generally uses "review" for a check of whether there is a tax risk worth pursuing, and "audit" for a detailed examination that can lead to amended assessments. A review can become an audit, so treat both seriously.

What triggers an ATO audit?

Common reasons the ATO looks closer include a mismatch with data it holds from banks, employers and other third parties, results well outside industry benchmarks, unusually large deductions or refunds, large one-off transactions and crypto activity that doesn't match what was reported. Being selected doesn't mean the ATO has concluded anything is wrong.

See ATO audit red flags, what ATO data matching already shows and crypto reviews and audits.

How far back can the ATO audit?

For income tax, the ATO can generally amend an assessment within 2 years after the notice of assessment for most individuals and small businesses (aggregated turnover under $10 million), and for medium businesses (under $50 million) for income years starting on or after 1 July 2021. Other taxpayers generally have 4 years, and there is no time limit if the Commissioner is of the opinion there has been fraud or evasion (Income Tax Assessment Act 1936 (ITAA 1936), s 170(1)). Some trust beneficiaries, partners and scheme cases are on 4 years, some rules such as section 100A can be applied at any time, and the period can be extended by consent or Federal Court order (s 170(7), (10)).

For GST, the ATO generally has 4 years from when you lodge the BAS, whatever the size of the business (Taxation Administration Act 1953 (TAA), Sch 1 ss 155-15, 155-35). Our guide to how far back the ATO can audit you explains who gets which period, when the clock starts and which records to keep.

What can the ATO make you hand over?

By written notice, the ATO can require you to give information, attend and give evidence (on oath or affirmation if required), or produce documents (TAA Sch 1 s 353-10). Authorised officers can also enter premises and access documents at all reasonable times (Sch 1 s 353-15). Failing to comply can be an offence (TAA ss 8C, 8D).

Before answering a formal notice, check what it requires and whether legal professional privilege protects any documents. See ATO information notices and access powers.

What happens in an ATO audit?

1. Scope. The ATO confirms the taxes, periods and issues under examination.
2. Information requests and interviews. You provide records and explanations.
3. Position paper. The ATO sets out its preliminary view in a position paper or statement of audit findings.
4. Your response. Often the key chance to change the outcome before assessments issue. See responding to an ATO position paper.
5. Finalisation. The ATO issues any amended assessments, penalties and interest.

See what happens in an ATO audit for more on each stage.

Under the ATO's Code of settlement (PS LA 2015/1), either side can propose settlement at any stage, including before assessments are raised. The ATO may also offer eligible small businesses (turnover under $10 million) an independent review of its position before the audit is finalised (ATO, Small business independent review, last updated 16 September 2026). Our position paper guide covers who qualifies and the 14-day window to request it.

What penalties and interest apply after an audit?

If the audit finds a shortfall caused by a false or misleading statement, the base penalty is 25% of it for failing to take reasonable care, 50% for recklessness and 75% for intentional disregard of the law (TAA Sch 1 s 284-90). If you took reasonable care, that penalty generally doesn't apply. The base penalty increases by 20% in some cases, such as obstructing the ATO or a repeat penalty (Sch 1 s 284-220), and the ATO can remit all or part of a penalty (Sch 1 s 298-20).

A voluntary disclosure before the ATO notifies you of an examination generally reduces the base penalty by 80%, or to nil for a shortfall under $1,000. Afterwards, a 20% reduction may be available if the disclosure saves the ATO significant time or resources (Sch 1 s 284-225). See ATO penalties and penalty remission and making a voluntary disclosure.

Amended income tax assessments attract shortfall interest charge (SIC) from the original due date until the day before the amended notice issues (Sch 1 s 280-100). Any amount still unpaid after the new due date then attracts general interest charge (GIC). The ATO can remit SIC where it is fair and reasonable (Sch 1 s 280-160). Neither SIC nor GIC is deductible for income years starting on or after 1 July 2025 (Income Tax Assessment Act 1997 (ITAA 1997), s 26-5(1A)).

Division 7A, trust and other targeted reviews

We also act in ATO reviews of particular rules:

• Division 7A: private company loans, payments and forgiven debts to shareholders and associates, which can be treated as dividends (ITAA 1936 Div 7A).
• Section 100A: trust distributions under a reimbursement agreement (ITAA 1936 s 100A).
• Part IVA: the general anti-avoidance rule, for schemes entered into for the sole or dominant purpose of obtaining a tax benefit, judged objectively against the factors in the Act (ITAA 1936 Pt IVA, ss 177A(5), 177D).
• Personal services income: income mainly rewarding an individual's personal efforts or skills, including through a company or trust (ITAA 1997 Pt 2-42).
• Tax residency: whether you were an Australian resident, which generally decides whether foreign income is taxed here.
• Tax evasion and fraud investigations: where the ATO suspects deliberate wrongdoing. Get legal advice before you respond.

How do you lodge an ATO objection?

An objection is the formal way to challenge an ATO assessment, or another ATO decision that the law makes open to objection. It must be in the approved form, lodged in time, and state fully and in detail the grounds you rely on (TAA s 14ZU).

For income tax, the time limit is generally 2 years after notice of the assessment where the 2-year amendment period applies and 4 years otherwise. For an amended assessment, such as after an audit, it is the later of that original period and 60 days after the amended notice is served, and you can generally only object to the matters that changed (ss 14ZV, 14ZW). Many other ATO decisions have 60 days. If you've missed the deadline, you can still lodge with a written request to treat the objection as lodged in time, and if the ATO refuses, you can ask the Administrative Review Tribunal (ART) to review that refusal (ss 14ZW(2)–(3), 14ZX(4)).

See ATO objections for how the process works, objection time limits and late objections for every deadline, how to write an ATO objection and objecting to private rulings.

Do you have to pay the tax while you dispute it?

Legally, yes. Lodging an objection doesn't change when the tax is due, and a pending ART review or court appeal doesn't stop the ATO recovering it (TAA ss 14ZZM, 14ZZR). The limited exception is that a small business entity can ask the ART to pause recovery of some business-related assessments while its review runs, and the ART must first be satisfied the application isn't frivolous, vexatious or lacking in substance (ss 14ZZM(2), 14ZZH).

In practice, the ATO's practice statement on disputed debts (PS LA 2011/4, last updated 25 June 2026) requires large business and wealthy group taxpayers to pay in full or enter a 50:50 arrangement (para 6). For other taxpayers, recovery depends on the ATO's risk assessment, and where your affairs are straightforward and the risk is low, it won't take recovery action while the objection, review or appeal is on foot (paras 9–10). Under a 50:50 arrangement, you pay all undisputed debts and at least 50% of the disputed principal tax, and the ATO defers recovery of the balance and remits half the GIC on it while the dispute runs (paras 25–28). GIC otherwise keeps accruing. See how the 50:50 arrangement works.

What if the ATO disallows your objection?

If your objection is disallowed in whole or part, you can generally apply to the ART for review or appeal to the Federal Court (TAA s 14ZZ), within 60 days after you are served with notice of the objection decision (ss 14ZZC, 14ZZN). The ART can extend the time to apply for review if it considers that reasonable (Administrative Review Tribunal Act 2024, s 19), but don't plan on it. The ART replaced the Administrative Appeals Tribunal on 14 October 2024.

In both, you are limited to the grounds in your objection unless the ART or court orders otherwise, and you must prove the assessment is excessive or otherwise incorrect and what it should have been (ss 14ZZK, 14ZZO). So we draft objections with a possible hearing in mind. An ART hearing is held in private if you ask (s 14ZZE). See challenging an objection decision in the ART and Federal Court.

How we help with ATO audits and disputes

• We confirm what the ATO is examining and the deadlines, and organise records and explanations so they answer its questions, and no more.
• We respond to position papers on the law and the evidence, and protect privilege where it applies.
• We negotiate settlements where that is the sensible commercial outcome, and brief experienced tax barristers when a dispute needs to run.
• We keep your accountant involved throughout. See how we work with accountants.

Next step

Send us the ATO's letter, information request or position paper, with a note of the years and taxes it covers and any deadline the ATO has set. If amended assessments or an objection decision have already issued, include them and the date you received them, so we can confirm your deadline on the first call.