Tax administration, compliance and dispute resolution
This domain tests assessment and amendment rules, objection and review pathways, penalty and interest regimes, and the practical obligations of lodgment and record keeping.
Assessments and objections
- Australia uses self-assessment; the Commissioner issues a notice of assessment which sets the objection clock running.
- A taxpayer must lodge a notice of objection within 60 days of the notice of assessment, stating fully and in detail the grounds relied on.
- Part IVC of the Taxation Administration Act 1953 governs the process: objection, then review by the Administrative Review Tribunal (which replaced the AAT from 14 October 2024), then appeal to the Federal Court on a question of law only.
Amendment periods
- Generally two years for individuals and small business entities and four years for other taxpayers, running from the day the notice of assessment is given.
- There is no time limit where fraud or evasion is involved, and the Commissioner may amend at any time with the taxpayer's consent.
Penalties and interest
- Base penalties for shortfalls are 25% for carelessness, 50% for recklessness and 75% for intentional disregard; a 20% uplift can apply for aggravating conduct.
- Voluntary disclosure reduces the base penalty by 80% if made before the audit is notified and by 20% after.
- Shortfall interest charge and general interest charge accrue, subject to remission in appropriate cases.
- Director penalty notices must be addressed within 21 days of the notice to avoid personal liability for PAYG withholding and superannuation liabilities.
Worked example
A taxpayer carelessly understates income, producing a $40,000 shortfall. The base penalty is 25% × $40,000 = $10,000. The taxpayer discloses after being notified of the audit, so the 20% reduction applies: penalty becomes $8,000, with shortfall interest charge accruing on the tax shortfall.
Traps
- Missing the 60-day objection deadline or objecting without full grounds.
- Assuming payment of the assessment is deferred while an objection is considered; it is not.
- Failing to keep records for five years after the relevant act.
- Treating a private ruling as applying to years other than the one ruled on.