Making a voluntary disclosure to the ATO

An ATO voluntary disclosure means telling the ATO, in the approved form, about an error in a return, activity statement or other statement before it finds the error itself. If you do it before the ATO tells you it is examining your affairs, the shortfall penalty is generally reduced by 80%, or to nil if the shortfall is under $1,000 (Taxation Administration Act 1953 (TAA), Sch 1 s 284-225).

Disclosing after the ATO makes contact can still help, but usually less, and interest generally still applies. In a serious matter, how you disclose matters as much as when. Section references are to Schedule 1 of the TAA unless we say otherwise.

Which penalties does a voluntary disclosure reduce?

You can be liable to an administrative penalty if you, or your agent, make a statement to the ATO that is false or misleading in a material particular (ss 284-75(1), 284-25). If it leaves your tax too low, or a refund or credit too high, the difference is a "shortfall amount" (s 284-80). The base penalty depends on why the statement was wrong (s 284-90(1)), and is generally doubled for significant global entities (s 284-90(1A)).

Cause of the shortfall	Base penalty	After an 80% reduction
Intentional disregard of the law	75% of the shortfall	15% of the shortfall
Recklessness	50%	10%
Failure to take reasonable care	25%	5%

There is generally no penalty for the statement if you and your agent took reasonable care (s 284-75(5)), or if a registered tax or BAS agent made it after you gave them all the relevant information, unless the agent was reckless or intentionally disregarded the law (s 284-75(6)).

A false or misleading statement that produces no shortfall can still attract a penalty in penalty units if it resulted from a failure to take reasonable care, recklessness or intentional disregard. A disclosure before any examination notice reduces that penalty to nil (s 284-90(1) items 3A–3C, s 284-225(4A)). Scheme penalties can be reduced by 80%, but not to nil (s 284-225(4)).

How much does a voluntary disclosure reduce the penalty?

When you tell the ATO	Effect on the base penalty
Before it tells you of an examination, shortfall of $1,000 or more	Reduced by 80% (s 284-225(3)(a))
Before it tells you of an examination, shortfall under $1,000	Reduced to nil (s 284-225(3)(b))
After it tells you, if the disclosure can reasonably be estimated to have saved it significant time or resources	Reduced by 20% (s 284-225(1))
After it tells you, if the ATO decides to treat the disclosure as made before	Reduced by 80%, or to nil (s 284-225(5))
The ATO finds the error itself	No reduction

If the ATO has publicly asked for disclosures by a set date about a scheme or transaction that applies to your affairs, the larger reduction needs a disclosure before that date, if it comes first (s 284-225(2)(b)). In the ATO's view, several disclosures about the same period are added together to test the $1,000 threshold (MT 2012/3, para 35).

Waiting also costs. If you become aware of a shortfall after lodging and don't tell the ATO within a reasonable time, the base penalty is increased by 20% (s 284-220(1)(b)).

For example, suppose a failure to take reasonable care left $10,000 of tax out of a return. The base penalty is $2,500. Disclosed before the ATO makes contact, it falls to $500. Disclosed early in an audit in a way that saves the ATO significant work, it may be $2,000. Found by the ATO after the taxpayer knew and stayed silent, it could be $3,000. Interest is extra in each case.

When has the ATO "told you" about an examination?

The ATO's view is in its public ruling on s 284-225, Miscellaneous Taxation Ruling MT 2012/3.

• "Examination" is broad. Audits, reviews, verification checks and record-keeping reviews all count, but bulk educational letters don't (paras 48–49).
• The contact must be clear. You are told when the ATO first contacts you or your representative about the examination, in writing or orally, identifying the period. "Under review" is enough, but contact that creates no more than a suspicion isn't (paras 64, 70–71).
• Other taxes and periods stay open. An income tax audit doesn't stop an unprompted disclosure about GST, or about another period, unless the ATO has said it is examining those too (paras 62, 69, 92–93).
• General ATO activity doesn't count. An industry project, the ATO's compliance program or being listed for future audit doesn't stop a disclosure attracting the larger reduction (para 94).
• A finished examination stops counting. If the ATO has told you an examination is complete, a later disclosure is treated as made before notice, unless you have since been told of a new examination (para 57).

Can you still make a voluntary disclosure after the ATO contacts you?

Yes, and it is usually still worthwhile. In the ruling's appendix, the ATO says it will generally treat a disclosure as made before notice where:

• it is only assessing risk, as in a risk review,
• the disclosure is outside the scope of the examination,
• you make a full disclosure by a date the ATO invited, or on or before the formal start date it gave, or
• you were already reviewing your affairs and would have disclosed anyway (para 133).

The disclosure must still be voluntary (para 134), and the ATO usually won't use this discretion for a disclosure made during an audit that followed a risk review of the same matters you were told about (para 135).

Agreeing with what the ATO has already found, or confirming a smaller figure, isn't a disclosure (para 82). So if the ATO raises a mismatch from ATO data matching, confirming that item won't reduce the penalty, although disclosing further errors may (paras 83–89).

What makes a disclosure "voluntary"?

A disclosure isn't voluntary if you knew of the problem and would have been highly unlikely to come forward had you not learned that the ATO had uncovered it or was about to, for example after search warrants were executed (MT 2012/3, paras 73–77). Also:

• You must tell the ATO something it doesn't already know. Answering questions or handing over documents isn't enough (paras 80–81).
• You needn't state the exact shortfall if that isn't practicable, as long as you give the ATO what it reasonably needs to work it out (para 105).
• You needn't admit liability, and you can still dispute the ATO's view (para 108).
• Only the part of a shortfall you disclose gets the reduction (para 107).

How to make a voluntary disclosure to the ATO

The disclosure must be in the approved form, but it needn't be in writing, and the ATO publishes specific forms for some types of disclosure (MT 2012/3, para 104). An unprompted amendment request or revised activity statement will usually count, and so can a private ruling application (paras 110–112).

Before a review or audit starts, the ATO accepts disclosures in writing (a letter or a specific disclosure form, by post) or electronically, for example an amendment through online services or a form attached to a secure mail message. Once you have been told of a review or audit, you disclose to the officer conducting it, using the ATO's "Voluntary disclosure form – if you're under review or audit" (ATO, "How to make a voluntary disclosure", last updated 27 March 2026).

In practice:

1. Work out the scope. Which taxes, periods and entities are affected?
2. Quantify it. Calculate the shortfall for each period, with the records behind it.
3. Explain why it happened. The cause sets the penalty rate, so describe it accurately. Carelessness is not recklessness.
4. Lodge it. Use amended returns, revised activity statements or a written disclosure lodged by your tax agent or lawyer, on the ATO's specific form where there is one.
5. Ask for remission where there are grounds. The ATO can remit all or part of a penalty (s 298-20), shortfall interest charge (s 280-160) and general interest charge (s 8AAG in Part IIA of the TAA).
6. Plan payment. If you can't pay at once, ask for an ATO payment arrangement.

What if you disagree with the penalty?

You can object under Part IVC of the TAA to the penalty assessment (s 298-30), and to a refusal to remit if more than 2 penalty units remain (s 298-20(3)). The objection is generally due within 60 days after notice of the decision is served on you, or within any longer period you have to object to the assessment the penalty relates to. A late objection needs a written request for the ATO to accept it (s 14ZW(1)(c), (1BB) and (2) in Part IVC of the TAA).

Do you still pay interest after a disclosure?

Generally, yes. Where the ATO amends an income tax assessment, shortfall interest charge (SIC) runs from the original due date to the day before the ATO gives notice of the amended assessment (s 280-100), at the base interest rate plus 3 percentage points (s 280-105; PS LA 2006/8, para 18). Anything then left unpaid after its new due date attracts general interest charge (GIC) (note to s 280-100).

For GST and other activity statement amounts, GIC generally runs from the original due date (s 105-80). Neither charge is deductible for income years starting on or after 1 July 2025 (Income Tax Assessment Act 1997 (ITAA 1997), s 26-5(1A)).

Under the ATO's SIC practice statement, PS LA 2006/8, an unprompted disclosure isn't of itself a ground for remission (para 63). But remission may be fair and reasonable in some cases, generally down to the base rate. The ATO looks at how promptly you disclosed, whether it was before any ATO contact, whether the ATO contributed to the error, the size of the shortfall and your compliance history (paras 65–66).

If, once it has all the information it needs, the ATO takes longer than its published service standard to process an unprompted amendment, it will generally remit SIC for the delay in full (paras 69–70). See shortfall interest charge and how to get it remitted.

How far back should a disclosure go?

Assessment	The ATO can generally amend within...
Income tax: most individuals, and small or medium business entities	2 years after the day the ATO gives notice of the assessment (Income Tax Assessment Act 1936 (ITAA 1936), s 170(1) items 1–3)
Income tax: other taxpayers	4 years after that day (ITAA 1936 s 170(1) item 4)
GST and other indirect taxes	4 years after the day notice of the assessment is treated as given, which for GST is generally the day you lodge the activity statement (ss 155-15, 155-35)
Any of these, if the ATO is of the opinion there has been fraud or evasion	At any time (ITAA 1936 s 170(1) item 5; s 155-60)

The 2-year period has exceptions. For example, it doesn't apply where it is reasonable to conclude that a scheme was entered into for the sole or dominant purpose of getting a tax benefit, or to an individual running a business that isn't a small or medium business entity (ITAA 1936 s 170(1) items 1–3).

So whether conduct is described as careless, reckless or deliberate can affect how many years are open, not just the penalty rate, and the way a disclosure describes it can shape the ATO's view. See how far back can the ATO audit you?

Disclosing offshore income

Australian residents are taxed on ordinary and statutory income from all sources, in or out of Australia (ITAA 1997 ss 6-5(2), 6-10(4)). That usually includes overseas interest, rent, pensions and capital gains, with a foreign income tax offset generally available for foreign tax paid (ITAA 1997 s 770-10).

Under the Common Reporting Standard, Australian financial institutions report foreign residents' accounts so the information can be exchanged with other jurisdictions (s 396-100), and the ATO receives similar information about Australian residents' accounts abroad from other countries' tax authorities (ATO, "Common Reporting Standard").

Offshore disclosures follow the same rules, but often span several years and foreign records, so allow time.

Should you speak to a lawyer before making a voluntary disclosure?

For a straightforward mistake, your accountant can usually prepare the amendment. Where the amounts are large, several years are involved or the error may have been deliberate, get legal advice before contacting the ATO, because the penalty rate, the amendment periods and the ATO's response all turn on what happened and why.

Privilege. Confidential communications with a lawyer for the dominant purpose of legal advice are generally protected by legal professional privilege (Esso Australia Resources Ltd v Commissioner of Taxation [1999] HCA 67). Privilege doesn't cover the underlying facts or records that already existed, and doesn't generally extend to tax advice from an accountant. But a document an accountant prepares at your direction, for the dominant purpose of you getting legal advice from us, can be privileged (Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122).

Not an amnesty. MT 2012/3 doesn't deal with whether someone who discloses will be prosecuted. It says those decisions are made by the Director of Public Prosecutions, with ATO referrals made under the ATO's prosecution policy (para 7). See tax evasion and ATO fraud investigations.

Don't alter, move or destroy records while you work out what to disclose. Taking steps to prevent or obstruct the ATO from finding out about a shortfall increases the base penalty by 20% (s 284-220(1)(a)), and can have more serious consequences.

How we help

• Scope and quantify. With your accountant, we identify each affected tax, period and entity and calculate the shortfall.
• Advise on the penalty. We tell you plainly which penalty rates and amendment periods are likely to apply.
• Prepare the disclosure. We draft it with the explanation and any request for penalty and interest remission.
• Deal with the ATO. We handle follow-up questions and any objection, as part of our work on ATO audits, reviews and objections. Accountants, see how we work with accountants.

Next step

Send us a short note of what you think is wrong, the taxes and periods involved and a rough estimate of the amounts. Tell us whether the ATO has contacted you about any review or audit, and include any letter it sent. In a first call we'll tell you whether timing is critical, what the disclosure should cover and how to make it.