Tax Administration, Returns, Assessments and Professional Ethics
The assessment cycle
Tax administration centres on self-assessment: the taxpayer lodges a return, the Commissioner is taken to have made an assessment, and the onus of proving an assessment is excessive lies on the taxpayer (s 14ZZK of the Taxation Administration Act 1953). Candidates must understand amendment periods (generally two years for individuals and four years for other entities, extended where there is fraud or evasion), the four-year limit on primary tax amended to give effect to a private ruling, and the objection and review pathway through the Administrative Review Tribunal and then the Federal Court on appeal.
Record keeping and penalties
The law requires records be kept for five years after the relevant act. The shortfall penalty regime applies base penalties (commonly 25% for failure to take reasonable care, 50% for recklessness, 75% for intentional disregard), uplifted or reduced for cooperation, then increased by 20% for a second offence. Interest on overpaid and underpaid tax runs separately from penalties.
Ethics and the adviser's role
Professional obligations include acting in the client's best interests within the law, maintaining confidentiality, avoiding conflicts, and not signing a return the adviser knows to be incorrect. Tax planning advice must be honest about risk; aggressive positions must be disclosed to the client with the prospect of Part IVA or specific integrity measures. Candidates should recognise that an adviser cannot rely on a client's instructions to justify a false statement.
Worked example
A taxpayer omits $40,000 of income through carelessness. Base penalty 25% of the shortfall, reduced by 20% for voluntary disclosure before audit, gives 20% of tax shortfall.