If a taxpayer has an overdue tax return, the law allows us to make an assessment of their taxable income for that year. We may issue a default assessment where taxpayers refuse to work with us despite our efforts to contact them. Our aim is to work with taxpayers to help them in meeting their lodgment obligations. The assessment is referred to as a default assessment because it is made as a consequence of the taxpayer defaulting on their lodgment obligation.
We are continually expanding our access to transactions and payments data. This is increasing our capacity through data-matching to make reasonable assessments of taxable incomes where taxpayers have overdue returns.
The process for issuing a default assessment generally includes:
- Issuing a default assessment warning letter (DAWL) that includes:
- details of the default assessment
- the date the overdue return needs to be lodged by to avoid being issued a default assessment.
- Phoning the taxpayer, or their tax agent if they have one, to confirm receipt of the DAWL and their intentions regarding the overdue return.
- Issuing the default assessment where the return is not lodged by the due date in the DAWL.
Where applicable, an administrative penalty of 75% of the tax-related liability will be applied. This may be increased by 20% for repeat offenders. Failure to lodge on time penalties may also be applied.
|
There will be circumstances where it may be appropriate to issue a default assessment without giving advance notice to the taxpayer, such as:
- where there is a risk of flight (for example, the taxpayer is likely to leave the country)
- a dilution of assets (for example, where assets are likely to be transferred)
- movement of funds outside Australia (for example, where a non-resident is selling their sole Australian asset)
- other cases involving urgency (for example, to issue an amended assessment within the period of review).
|
Our assessment of a taxpayer's taxable income is generally made by reference to their assessable income and allowable deductions for the relevant income year. The DAWL will advise how the taxable income was calculated.
In arriving at the taxable income of a taxpayer for an income year, we take into account various sources of information including:
- previously lodged tax returns or activity statements
- income they may have received from financial institutions and government bodies
- salary or wages reported to us by their employer
- gross domestic product (GDP) growth rate
- small business benchmarks and ratios for their industry segment
- taxation statistics published every year
- any other relevant information available to us.
Gross domestic product (GDP)
The GDP growth rate is the percentage that the Australian economy grew or contracted in a period.
We may use GDP growth rates to help determine the income, expenditure and other deductions from previously lodged tax returns to determine the taxable income for the year of the overdue return.
The DAWL will advise if we have used GDP growth rates in our calculation.
Taxation statistics, small business benchmarks and ratios
Taxation statistics, small business benchmarks and ratios enable us to make a reasonable assessment of the taxable income where details of actual amounts are not available.
If you receive a DAWL, you need to ensure:
- all overdue income tax returns are lodged by the date advised in the DAWL
- you are aware of the impending default assessment.
If you are a tax agent:
- notify your client immediately of the impending default assessment and influence them to lodge
- remove the client from your client list through our Tax Agent Portal or electronic lodgment service (ELS) if you no longer manage the taxpayer's account
- where known, provide new contact details of the client.
|
If the relevant tax returns were lodged on or around the date of the DAWL, you do not need to take any further action.
|
Last Modified: Monday, 9 July 2012