What to Do When the ATO Contacts You for a Review or Audit

When the ATO contacts you about a review or audit, the first step is to stay calm. Panic rarely helps. Instead, work through the steps below promptly. For a fuller checklist, see our guide on what to do if you receive an ATO audit notice.

1. Gather what you gave your tax agent

Ask your tax agent to collect all the information you provided for the period under review. However, do not ask them to start new work on the matter yet. In some cases, the original return preparation is what triggered the ATO’s questions.

2. Get advice from the right adviser

Discuss your situation with an experienced tax adviser, ideally a tax accountant and a tax lawyer working together. Be completely open with them. If you hold back information from your own advisers, you make it harder for them to protect you.

3. Rebuild your records

Collect bank statements, accounting records and any other documents for the period. If you have lost bank statements, your bank can usually provide copies. Where there are no accounting records (for example in MYOB or Xero), your adviser can help you rebuild them from bank statements and other source documents.

If the ATO is treating money as income when it was something else, such as a loan or a gift from your parents, you will need evidence. For example, loan documents or your parents’ bank statements can show where the money came from.

4. Build an arguable position

When the ATO contacts you about a grey area of tax law, a tax lawyer can help build a “reasonably arguable position” against the ATO’s view. In practice, your lawyer and accountant should work as a team on this. Our ATO audit help service is built around that approach.

5. Deal with penalties and interest

If it turns out you do owe more tax, penalties and shortfall interest charge can follow. Sometimes, penalties and interest together exceed the tax itself. If you have a legitimate reason, usually personal circumstances beyond your control, the ATO may remit penalties and interest. A well-prepared submission from your adviser makes a real difference here; see ATO penalty remission. If you disagree with the ATO’s decision, you can also dispute it (ATO: dispute a decision).

6. Choose your adviser carefully

Tax disputes can be costly, both because of the tax bill and because of professional fees. So choose your adviser carefully, and if something does not feel right, get a second opinion before you commit.