What happens if the ATO audits me?

In Plain English:

If the Australian Taxation Office (ATO) decides to audit you, it means they're going to take a closer look at your tax affairs. They might ask you to provide information, attend an interview, or produce documents to help them check if you've correctly reported your income and deductions, as outlined in the Taxation Administration Act 1953. The Taxation Administration Act 1953 also empowers the Commissioner to obtain information and evidence.

Detailed Explanation:

If the ATO audits you, the following may occur:

  1. Information Gathering: The Commissioner of Taxation has broad powers to obtain information under the Taxation Administration Act 1953. Specifically, section 353-10 of the Taxation Administration Act 1953 allows the Commissioner to require you, by written notice, to:

    • Provide any information required for the administration or operation of a taxation law.
    • Attend and give evidence before the Commissioner or an authorized individual.
    • Produce any documents in your custody or control for the administration or operation of a taxation law.
    • Penalties for Non-Compliance: Failing to comply with a notice issued under section 353-10 can result in penalties under sections 8C or 8D of the Taxation Administration Act 1953.
    • Security Requirements: Under section 255-100 of the Taxation Administration Act 1953, the Commissioner can require you to give security. Failure to provide the required security can result in a penalty of 100 penalty units.
    • Court Orders: If you fail to comply with a requirement to give security, the Federal Court can order you to comply, as per section 255-115 of the Taxation Administration Act 1953. Non-compliance with a court order can lead to a penalty of 50 penalty units or imprisonment for 12 months, or both, according to section 255-120 of the Taxation Administration Act 1953.
    • Third-Party Collection: The Commissioner may also collect amounts from third parties who owe you money, as outlined in Subdivision 260-A of the Taxation Administration Act 1953. This allows the ATO to recover tax-related liabilities from entities that owe money to the debtor.