What happens in an ATO audit

What happens in an ATO audit usually follows the same stages: the ATO tells you which taxes and periods it is examining, asks for records and explanations, sets out its preliminary view, then either closes the audit with no change or issues amended assessments, usually with interest and often a penalty. You can respond at each stage, and object to the result.

This is general information. For how we act, see ATO audits, reviews and objections.

Is it an ATO review or an audit?

The ATO's compliance work includes reviews (or risk reviews), audits, verification checks and record-keeping reviews (ATO ruling MT 2012/3, para 49).

• A review is generally a closer look to decide whether there is a tax risk worth pursuing, often a few questions about one item.
• An audit is a detailed examination to work out your actual liability, and usually ends in amended assessments if the ATO finds a problem.

A review can become an audit. Where it does, the ATO says it will generally start the audit straight after closing the review, and tell you so (MT 2012/3, para 57).

What does an ATO review letter mean?

Type of contact	What it usually means
Reminder letter sent to many taxpayers	Education only, not an examination (MT 2012/3, para 49)
Letter or call about one item	A review, often of a mismatch with data the ATO holds
Notice that a review or audit is starting	A formal examination of named taxes and periods
Formal notice under Taxation Administration Act 1953 (TAA) Sch 1 s 353-10	A compulsory requirement to give information, attend or produce documents

How do you know if the ATO is auditing you?

A review or audit normally starts with the ATO contacting you or your registered tax agent by letter, phone, email or SMS. The contact should say what the ATO is examining and for which periods, and that sets the scope of the examination for penalty reductions (MT 2012/3, paras 46, 64).

Is it really the ATO?

The ATO's Verify or report an ATO scam page (last updated 23 March 2026) says the ATO will never send unsolicited messages containing hyperlinks or QR codes, threaten you with arrest, ask for payment by gift card or crypto, or stop you speaking with your tax agent. Genuine ATO calls show as No Caller ID.

If unsure, don't respond. Check through ATO online services in myGov or your tax agent, or call the number on the ATO website, never one in the message.

How often does the ATO audit individuals?

There is no set cycle. The ATO says it takes a risk-based approach (ATO, Our formal access powers, last updated 1 May 2024), so a review of an individual usually follows something specific: income missing from a return, deductions that look high for your job, or a mismatch with third-party data. Being contacted doesn't mean the ATO has decided you've done something wrong. See ATO audit red flags.

What happens in an ATO audit, step by step

1. Information requests and interviews

The ATO usually starts by asking informally for records and explanations by a set date, and says it generally tries a cooperative approach first (Our formal access powers).

By written notice, the ATO can require you, or third parties such as your bank or accountant, to give information, attend and give evidence or produce documents (TAA Sch 1 s 353-10). Failing to comply with a formal notice, or to answer questions when attending under one, can be an offence (TAA ss 8C, 8D). See ATO information notices and access powers.

Before any interview, find out whether it is voluntary or under a formal notice. A false or misleading statement can attract its own penalty (TAA Sch 1 s 284-75(1)), so answer accurately, don't guess, and offer to confirm details in writing.

2. The position paper

Before making adjustments, the ATO usually sets out its preliminary view in writing, often in a position paper covering the facts, law, proposed adjustments and any penalty. This is often the key stage: you can correct facts, add evidence and argue the law before anything is assessed. See responding to an ATO position paper. The ATO may also offer eligible small businesses (turnover under $10 million) an independent review of its position by an officer not involved in the audit, before the audit is finalised. You must ask for it within 14 days of the offer (ATO, Small business independent review, last updated 16 September 2026). The ATO's current dispute resolution pages list no equivalent review for larger businesses: it discontinued its large market independent review from 1 October 2026.

3. Finalisation

If the ATO finds a problem, it issues amended assessments. In an income tax audit, it can generally amend within 2 years after the notice of assessment for most individuals and small and medium businesses (for medium businesses, income years starting on or after 1 July 2021), 4 years for other taxpayers, and at any time if it is of the opinion there has been fraud or evasion (Income Tax Assessment Act 1936 (ITAA 1936), s 170(1)).

If the audit won't finish in time, the ATO can ask you to consent in writing to an extension, or apply to the Federal Court for one (s 170(7)). You don't have to consent, so get advice first. See how far back the ATO can audit.

What happens if the ATO audit finds a problem?

• Extra tax. Extra income tax under an amended assessment is generally due 21 days after the ATO gives you notice of it (Income Tax Assessment Act 1997 (ITAA 1997), s 5-5(7)).
• Interest. For income tax, shortfall interest charge (SIC) runs on the extra tax from the original due date to the day before the amended notice (TAA Sch 1 s 280-100), then general interest charge (GIC) runs on any tax or SIC left unpaid after it falls due (ITAA 1997 s 5-15). For GST and other taxes, GIC usually applies instead of SIC (TAA Sch 1 s 105-80). Neither is deductible for income years starting on or after 1 July 2025 (ITAA 1997 s 26-5(1A)).
• Penalty. If the shortfall came from a false or misleading statement, the base penalty depends on how it happened (TAA Sch 1 s 284-90).

How the shortfall happened	Base penalty
Failure to take reasonable care	25% of the shortfall
Recklessness as to the operation of the law	50% of the shortfall
Intentional disregard of the law	75% of the shortfall

There's no penalty for a false or misleading statement if you and your agent took reasonable care, or generally if your registered tax agent made it, you gave the agent all relevant information, and the agent wasn't reckless or intentionally disregarding the law (s 284-75(5), (6)). The ATO can also remit all or part of a penalty (TAA Sch 1 s 298-20).

Voluntary disclosure and remission

A voluntary disclosure generally gets the largest reduction (80%, or to nil if the shortfall is under $1,000) only if made before the ATO tells you an examination of your affairs is to be made (TAA Sch 1 s 284-225(2), (3)). The ATO treats reviews as examinations (MT 2012/3, para 49), and a letter saying it is "checking this information" can be enough to tell you of one (para 71). But where the ATO is only identifying or assessing risks, such as in a risk review, it says it will generally treat a disclosure as if made before the examination, provided the disclosure is still voluntary (s 284-225(5); MT 2012/3, paras 133–134). It generally won't do that for a disclosure made after you're told of an audit that follows a risk review (para 135). Once you're told, a disclosure still reduces the base penalty by 20% if it can reasonably be estimated to save the ATO significant time or resources (s 284-225(1)). See making a voluntary disclosure.

The ATO can remit SIC where it considers it fair and reasonable (s 280-160), for example for unreasonable ATO delay in starting or finishing an audit that you didn't cause (PS LA 2006/8, paras 27–46). See shortfall interest charge and how to get it remitted.

Never alter, back-date, move or destroy records once the ATO is asking questions. If you take steps to prevent or obstruct the ATO from finding out about a shortfall, the base penalty increases by 20% (TAA Sch 1 s 284-220(1)(a)), and altering, concealing or destroying records with intent to deceive or obstruct the ATO is a criminal offence (TAA s 8T).

Can you object to an ATO audit result?

Yes. You can object to an amended assessment and to a shortfall penalty assessment (TAA Sch 1 s 298-30(2)), stating your grounds fully and in detail (TAA s 14ZU). For an amended income tax assessment, you generally have until the later of 2 or 4 years (whichever applied) after notice of the original assessment and 60 days after notice of the amendment, but only for the matters that changed (ss 14ZW(1B), (1BA), 14ZV). For a penalty assessment, it is generally 60 days after notice, or longer if the penalty relates to an assessment you have longer to object to (s 14ZW(1)(c), (1BB)). Time runs from service of the notice, which can be before you read it, and the ATO can refuse a late objection (ss 14ZW(2), (3), 14ZX).

Objecting doesn't by itself defer payment, and nor generally does an Administrative Review Tribunal (ART) review or Federal Court appeal (ss 14ZZM, 14ZZR), although a small business entity seeking ART review of an assessment relating to its business can ask the ART to pause recovery (ss 14ZZM(2), 14ZZH). See how ATO objections work.

Your rights during an ATO audit

The ATO's Charter

Under its Charter (ATO, Our Charter, last updated 20 February 2024), the ATO commits to treat you as honest unless it has reason to think otherwise and give you an opportunity to explain, to work with the adviser you choose, to explain its decisions and your review options, and to keep you informed. If you're unhappy with how an audit is handled, complain to the ATO, then the Inspector-General of Taxation and Taxation Ombudsman.

Privilege and the accountants' concession

The ATO's formal powers don't reach documents protected by legal professional privilege, which generally covers confidential communications with your lawyer made for the dominant purpose of legal advice, or of litigation under way or reasonably anticipated (ATO, Limits to our formal powers, last updated 1 May 2024). You must establish the claim, and sharing the advice with a third party can waive it.

Your accountant's advice generally isn't privileged. But under an administrative concession, the ATO generally won't seek tax advice papers of an external accountant independent of you, except in exceptional circumstances with senior written approval. It doesn't cover source documents such as ledgers, contracts and tax working papers (ATO, Guidelines to accessing professional accounting advisers' papers, last updated 14 October 2024).

When should you bring in a lawyer?

Your accountant can often handle a straightforward review, and we work alongside accountants, not in place of them. Get legal advice early if:

• the ATO has issued a formal notice, or wants documents that may include advice you need to protect,
• the amounts are large, or the issues include Part IVA, Division 7A, section 100A or residency,
• the ATO suggests recklessness, intentional disregard, fraud or evasion, or there is any sign of a criminal investigation, or
• you're considering a voluntary disclosure, have a position paper, or are asked to extend the amendment period.

What to do in the first week

1. Check it's genuine, as above.
2. Note every deadline, and the taxes, periods and issues in scope.
3. Tell your accountant and agree who deals with the ATO.
4. Ask early for more time if you need it, in writing.
5. Gather the records in scope, and copy everything you send.
6. Set aside advice documents so privilege or concession claims can be considered first.
7. Check for errors, and get advice on a voluntary disclosure before the ATO raises them.

Next step

Send us the ATO's letter or notice (every page), any information request and its deadline, a short note of the years, taxes and issues involved, and anything your accountant has already sent. In a first call we'll tell you what stage the audit is at, which documents need protecting and what to do before the next deadline.