The information we need to administer the Australian tax and superannuation systems generally resides with taxpayers, their advisers or other parties involved in their business and tax affairs. Where the information we need is not given to us cooperatively, we have formal information-gathering powers available to us, including our notice powers. Our notice powers require you to provide information, attend and give evidence or produce documents.
You have rights and obligations when we issue a notice to you. It is important to understand the reasons why you have received the notice, how you should respond to it and what you can expect from us.
A formal notice may require you to do any of the following:
- give information – to answer our questions in writing, based on your knowledge and understanding
- attend and give evidence – to attend an interview and answer questions, based on your knowledge and understanding, you may be required to give the evidence on oath or affirmation
- produce documents – to send documents to us.
The circumstances in which we issue a notice are varied, and range from simple verification procedures to situations where there is evidence of serious tax avoidance. You may receive a notice in relation to your tax affairs, or as a third party who may be able to assist us with our enquiries.
The decision to use our notice powers is reviewable by the Federal Court under the Administrative Decisions (Judicial Review) Act 1977. You are entitled under section 13 of the Act to request a 'statement of reasons' for a decision to issue the notice. Our decision not to grant an extension of time to comply with a notice is also reviewable.
Details of the number and types of notices we issued are available in our Annual report.
The grounds for review of a decision to use our notice powers are set out in section 5 of the Administrative Decisions (Judicial Review) Act 1977.
In most situations, we will only issue a notice after attempting to obtain the information by using a cooperative approach. In some cases, we may need to use our notice powers in the first instance.
We may decide to issue a notice when:
- we need to ensure the efficient use of our resources
- you have requested us to issue a notice to you
- your compliance behaviour warrants the issue of a notice
- there are privacy, contractual or confidentiality obligations, such as when a third party or another government agency possesses information relevant to our enquiries
- we are seeking oral evidence on oath or affirmation
- we have been unable to acquire the information using our access powers
- you have ignored a request or given an unsatisfactory response, such as an ambiguous reply
- we have genuine concerns that documents could be lost or destroyed.
Before issuing a notice, we will consider the importance and relevance of the information or evidence we are seeking. We try to ensure that:
- our notice is not made for information that is already recorded on our systems
- information you have already given is not sought in the notice – this does not include information we consider to be vague or incomplete, or where it appears you are making false or misleading statements
- the cost and disruption of the notice to both parties is minimised.
In cases where the information or evidence is held by you as well as a third party, we will generally seek to obtain the information from you first.
To ensure that community confidence in the tax system is maintained, we take firm action against those we suspect are involved in tax avoidance. In these circumstances we may:
- conduct our compliance activities without informing you
- issue our notice to third parties about your affairs without informing you or asking you directly.
Example – Issuing a notice due to previous conduct
One year ago, we conducted a risk review on John. Although John and his tax agent had discussions with us during the risk review, they did not give us the information or documents we requested.
This year John receives a notice of intention to audit letter from us. He is likely to receive a notice to give information during the current audit because of his history in failing to cooperate with us the previous year.End of example
Cycle of a notice
Figure 4 shows the cycle of a notice. If we decide to issue a notice, it is prepared, authorised and issued. If the information is received by the due date we analyse it and may issue an assessment.
If we have not received the information by the due date we will either:
- give an extension of time
- refer the matter for prosecution.
Figure 4 Cycle of a notice
Enquiries about current or future tax affairs
In addition to past income years, our notices can require information about current or future years, or both. For example, our enquiries may involve gathering information and documents about the disposal of an asset before the relevant income tax return has been lodged.
This approach allows us to gather information earlier. It is also important for our understanding and knowledge of your tax affairs and the market and economic conditions in which your business operates. It allows us to detect risks early, respond to emerging problems as they arise and help ensure your compliance for the years under review.
This type of enquiry may take many different forms, including but not limited to:
- an enquiry, review or audit of your tax affairs before the associated reporting or lodgment requirements fall due
- gathering intelligence
- monitoring revenue collections
- enquiries from data analysis
- examining your tax planning for proposed legislation
- an audit into aggressive tax planning practices.
Our notice powers are wide and flexible, but they are not unlimited. We endeavour to exercise our powers:
- in good faith
- in strict compliance with the law under which the notice has been issued
- for the proper purposes of that law.
Our notices will state:
- the name and address of the entity required to comply with the notice
- the law under which the notice is issued
- what the notice requires (to identify with sufficient clarity the documents sought or the information required)
- the reason we require the information
- the time and place to comply.
Our notice powers may be limited in certain ways including:
- legal professional privilege
- the accountants' concession
- where we seek access to advice for a corporate board on tax compliance risk.
We provide a detailed explanation of the limits to our notice powers under Limits to our formal powers.
If you believe that our notice (or part of it) is vague or ambiguous, you are still required to respond to it. You should contact the case officer named in the notice to clarify what is required. If a notice contains obvious ambiguities, we may decide to withdraw it and issue a new notice to you. We list the notice provisions of some of the laws we administer under Legislative references.
Notices and prosecution
Our policy is not to use our notice powers to gather evidence for the purposes of prosecution. However, information obtained under the powers may be used as evidence in a prosecution – for example, if you make a false or misleading statement to us.
Generally, if you are under investigation for a criminal offence you must still comply with a notice and cannot claim privilege against self-incrimination in these circumstances.
Third-party duty of confidentiality
Our notice powers are not restricted by claims of confidentiality. In particular, a notice operates to override any contractual obligation of the recipient to preserve confidentiality.
For example, a notice for the production of documents contained in a safe deposit box will override a bank’s duty of confidentiality. In addition, we can issue a notice to require information kept in Australia about offshore bank accounts.
Self-incrimination and spousal privilege
You cannot rely on the privilege against self-incrimination to not comply with a notice. Also, you cannot refuse to answer questions about your spouse.
If you are under investigation by another government agency, but have not been charged with an offence, we are likely to continue our investigation. If you are charged with an offence, we may defer our investigation until the matter is resolved.
If you are involved in criminal proceedings that relate to tax offences (for example, you have been charged with a tax-related offence), we may defer our investigations until the criminal matter has been resolved.
Notices issued during litigation
In some cases, a notice in relation to a matter that is subject to court proceedings may be in contempt of court. Our ability to issue a notice in these circumstances is usually unaffected when:
- the litigation is before the Administrative Appeals Tribunal
- the issues under dispute in the litigation will not be the subject of our notice powers
- we are not a party to the court proceedings.
If you receive a notice from us that relates to your current legal proceedings, you should contact us immediately to make sure we are aware of your litigation.
If you believe that our notice may be in contempt of court, you should advise our contact officer of your reasons in writing and request that the notice be withdrawn. We will consider your request and provide you with a response in writing. You will need to provide us with the following information to enable us to make a decision:
- the parties to the proceedings
- the issue in dispute
- the court or tribunal involved.
When dealing with more complex cases, we may engage advisers and withdraw the notice until the contempt of court issue is resolved. Until that decision is made, we will usually inform you about how your matter is progressing and work with our advisers to resolve the issue as quickly as we can.
If we consider that the notice could be in contempt of court, we will withdraw the notice.
A notice may require you to:
A notice requiring you to give information can be sent to you for many reasons – for example, we may need details of a particular transaction to determine its tax consequences.
This type of notice may also be used to determine whether any relevant documents we need are in existence. A notice to give information allows us to make wide-ranging enquiries – provided those enquiries are for the purposes of the relevant law.
We generally issue a notice to give information (rather than a notice to produce documents) if:
- the information we need is not contained in a document – for example, a transaction without a written record
- a description of a document, rather than its contents, will be sufficient.
A notice to give information can be used to make general enquiries about a category of persons. For example, a lawyer may be asked to give us a list of names of clients who have entered into a particular transaction. If we require bulk data from you, we will seek to minimise your time and cost in obtaining the information and responding to our notice as much as possible.
In certain cases where a notice is sent to you, but your response is given by another person (for example, your legal or accounting representative) you must provide us with your confirmation and acknowledgment of that response.
Our notices issued under this power will identify the information we need you to give us – for example, the notice might specify that we require a list of:
- the documents held in a safe deposit box at a specified bank branch in your name falling within a certain range of dates
- all the transactions relating to accounts in your name at the bank branch for a specified period.
We may obtain information from you by way of a notice, even though we may not know in advance whether the information actually exists or whether you can give it to us. In these cases, our notice may provide a general description of the information needed – for example, details of an offshore bank account held, including account name, account number and client number.
We generally require you to give the information to us in writing, but will also work with you if there is a suitable alternative means of providing it. Our preference is to obtain information electronically for notices requiring large volumes of information. We usually give you an opportunity to correct any assumptions you believe we have incorrectly made in the course of our information-gathering activities.
We may also issue a notice to another party to locate your whereabouts, unless this use of our notice powers could result in contempt of court.
We can use our notice powers to require you to attend and give evidence. We may issue these notices in situations that include when:
- it is preferable to obtain information or evidence verbally to seek immediate explanations
- there are no relevant documents or other relevant information available
- you no longer have custody of the documents we require.
A notice to attend and give evidence will usually identify the person whose income or assessment is under consideration. In certain cases, naming a person may not be sufficient to identify them. When writing to third parties we may also need to provide further details about the named persons to distinguish them from others of the same or similar name.
When issuing a notice to attend and give evidence, we will include the names of our officers who are authorised to take evidence at the interview. If our lawyers will be present at the interview, their names will not be stated on the notice, but will be included in the attached covering letter.
We explain how we conduct formal interviews, including oaths and affirmations, under Attending a formal interview.
We may issue a notice requiring you to produce documents in your custody or under your control if, for example:
- a notice requiring you to give information has revealed other documents that we require
- a company with a presence in Australia has custody or control of documents that are located overseas.
Identification of documents
Our notices will identify the documents we require with sufficient clarity in the given circumstances.
Retention of documents
We only retain your original documents for as long as is reasonably necessary – for example, a reasonable period of time to make copies.
We grant any reasonable request by the owner of the documents to have access to them while they are in our custody, and may also provide copies of documents if appropriate in the circumstances.
Custody or control of documents
A notice to produce documents requires the recipient to produce documents in their custody or under their control.
- Custody refers to situations where you, as the recipient of a notice, have direct physical possession of a document.
- Control refers to situations where you may lack physical possession of a document but have the right or power to require another person to produce it to you.
Example – Documents within control but not custody
Steven and Justin, who run a property developing partnership, each receive a notice from us requiring particular documents in connection with their assessments. Although Steven and Justin own the documents, they are physically held at their bank.
Steven and Justin are required to produce the documents as set out in the notice. Although Steven and Justin do not have physical custody of the documents, they have legal control given they have the ability to obtain them from the bank.End of example
A bank with physical custody of the contents of safe deposit boxes may also be contractually bound to not use its keys to those boxes – in this situation, the bank is required to produce the contents of the box to us as required by our notice.
Example – Documents within custody but not control
XYZ Bank Ltd receives a notice from us requiring the production of documents held by it on behalf of its clients, Tracy and Karen, who use a safe deposit box to hold documents and other items.
XYZ Bank Ltd is required to produce the documents in the safe deposit box according to our notice.
In this case, XYZ Bank Ltd has physical custody of the documents even though it does not have control of those documents.End of example
In some cases, a person who had legal ownership of the documents we require may be unable to produce them to us because they have been lost, destroyed or are withheld by a third party. In this situation, we may either:
- allow alternative documents to be provided
- approach the third party for the documents.
Example – Documents not within custody or control
A company has received a notice to produce particular company records. These records are held by the company's accountants under an equitable lien following a dispute over unpaid fees. The accountants have refused to give the documents to the company.
The company will not have to produce the documents because they are not within its custody or control. To obtain the records, a notice could instead be served on the accountants.End of example
We may use a notice to require the production of documents held outside Australia. For example, the owner with custody or control of the documents may be in Australia and the records we need are held by an overseas bank on their behalf. We explain our approach to issuing notices for international information gathering under Gathering offshore information.
If you use a consolidated group for tax purposes, we may vary our approach when issuing notices to entities within the consolidated group. This is likely to be the case where records are held by several group entities. Although a head company is responsible for keeping records, it must also ensure its subsidiaries keep all records necessary to satisfy the group’s record-keeping responsibilities. In these cases, we may need to ask about the location of the records and who is in control of them before we issue a notice.
When seeking the production of documents, we would normally issue the notice to the entity with custody of those documents. If we seek information (not documents) we consider which entity is best placed to give us that information – for example, if our enquiry relates to consolidated income tax return details, the information would generally be sought from the head company. If it relates to the rationale behind a particular transaction, the notice is likely to be sent to the entity (or an officer of that entity) that was a party to the transaction.
Example – Notice to subsidiary
Headco is the head company of a consolidated group consisting of Subco, Ausco and Vicco. During informal discussions with our officers, Headco advised that each subsidiary has custody of the records relating to transactions they undertake. Headco has entered into arrangements with the subsidiaries which brings the records under the control of Headco.
Subco receives a notice requiring production of documents relating to a transaction it undertook after the group was formed. In this case, we would usually issue our notice to Subco (which currently has custody of the records) although we also have an option of issuing the notice to Headco (which has control of the records).End of example
If you receive a notice, you are required to comply with it. This may involve giving information, attending and giving evidence and/or producing documents.
We generally explain why we require the information, and give you an opportunity to discuss the notice with us. A face-to-face meeting may not always be required – for example, if the information stated in the notice is unlikely to require explanation, such as details in support of a motor vehicle expense claim. In more routine cases, our practice is to provide a contact point where you can seek advice or discuss the notice.
We are committed to working with you to identify the most efficient way for you to respond to our information-gathering requests. To minimise your compliance costs, we consider whether there are alternative sources of the information that may satisfy our enquiries. However, there are times when we require specific documents, so we cannot always accept alternatives.
Sending a notice
There are a number of ways we can send a notice to you. You can also request how you would like the notice sent if we are already in discussions.
Generally we use the most recent address notified on our systems. In some situations, we will send your notice to another address we have on record – for example, where no preferred address for service has been given, or we are not satisfied that the preferred address is likely to be effective.
Time and place to comply
Our notices to give information or produce documents will advise how to comply, including the date and place. Our notices to attend and give evidence will also advise the time of your interview.
As a general rule, the place to attend and give evidence will be one of our sites. Where possible, we will arrange for that site to be the closest to your location – except where an alternative place convenient to all parties has been agreed to.
If the information or documents we require is held by a third party, we will normally consult them about the most convenient way for them to comply with our notice. Particular arrangements may be needed where they store the information electronically or there are other issues impacting on how the information is kept. We explain our approach to gathering electronic information under Gathering electronic information.
Period of time to comply
We generally give you 28 days to comply with a notice. Shorter or longer periods of time may apply in some cases.
When determining how much time to give you, we generally consider:
- the nature and extent of the information we need
- the amount of documentation required
- any previous requests made (even if they were not identical)
- the urgency of obtaining the information
- any previous correspondence or contact.
We also take matters into account that may affect your ability to comply, such as:
- your locality and the mode of service
- the availability of the information or documents
- the processes necessary to retrieve and produce the information or documents
- your cost of complying with the notice
- other concurrent obligations you may have, such as the preparation of annual accounts
- the resources available to you to obtain or prepare the information
- any other information requests made by us or other regulatory bodies.
A longer period may be given if we seek more extensive details – for example, information on transactions which took place over several years. Alternatively, a shorter period may be warranted – for example, when:
- you have agreed to comply within a shorter time
- our compliance activities relate to the current year
- more immediate compliance is required
- you have a history of non-compliance.
We will give you sufficient time to seek advice on claiming legal professional privilege, the accountants' concession or the corporate board advice concession.
Extension of time to comply
It is not our normal practice to vary the notice arrangements after a notice has been issued. In some circumstances, we may decide to grant an extension of time to comply with the notice. Although the law allows us to amend the time for compliance with a notice, we will usually withdraw the initial notice and issue you with a further notice with a later date to comply.
If you have difficulty responding to a notice in the time allowed, you are able to request an extension of time in writing for our consideration. The earlier you make your request the better. To allow us to make an informed decision, the request must include:
- a statement that you are not able to comply with the notice on or before the date specified
- the reasons why you cannot comply on time
- an alternative date on which you will comply.
If we decide that additional time will not be granted after considering your request, we will inform you of that decision in writing. If you still consider the timeframe is not long enough, the decision can be escalated to a senior officer. You can also contest our decision through the courts. It is important to remember that non-compliance with a notice may result in prosecution.
Example – Longer period to comply
AXC Pty Ltd (AXC) is the head company of a large group which is under audit for the years 30 June 2013 to 30 June 2016. Peter, the Tax Manager and authorised contact person, receives a phone call from Allison, our officer conducting the audit. Allison requires information and documentation in relation to AXC and its associated companies. Based on AXC’s past compliance behaviour, Allison has advised Peter that the information will be obtained using a notice.
Peter and Allison arrange a mutually appropriate time to meet and discuss the information and documents required. Due to the amount of information and documentation required, Peter and Allison agree that the notice will be broken up into three separate notices using a month-by-month staggered timeframe to allow time for Peter to provide the response.
Due to the nature of the notices it would be unreasonable for Peter to comply within the usual 28 days. However, it is reasonable for Peter to provide the response on a month-by-month basis. Allison can commence her review of the information and documentation without holding up the audit.
This arrangement helps progress the audit in a timely manner.End of example
To protect the integrity of the tax system, there are consequences if you:
- fail to comply with a notice
- fail to complete the requirements of the notice in full
- give us false statements under the notice.
You may be liable to prosecution if you:
- refuse or fail to provide information, or to produce records or documents
- refuse or fail to meet with us or answer questions
- make a false or misleading statement.
The destruction of documents or failing to comply with a notice in full (for example, by not answering all questions) may constitute an offence. Whether we decide to refer a matter for prosecution will depend on our prosecution policy and the Commonwealth prosecution guidelines.
If you are unable to comply with a notice, or you consider the notice is invalid, you should contact us in writing to explain your situation and why you cannot comply.
Example – Not complying with a notice
Michelle had received a number of informal requests and formal notices to attend an interview since July 2016. She either did not respond or called to say that she could not attend and did not provide a contact number.
Michelle was convicted of an offence under section 8C of the Taxation Administration Act 1953 (TAA) for failure to comply with requirements under tax law. The notice subject of the prosecution had a compliance date in October 2016, but it was not until July 2017 that she attended and gave evidence. The court found that she had shown a total disregard of the requirement to attend and had wasted a significant amount of our time.End of example
As an alternative to prosecution for making a false or misleading statement, we may apply an administrative penalty under Part 4-25 of Schedule 1 to the TAA.
Costs of compliance
Costs associated with managing your tax affairs are your responsibility. You may incur compliance costs when responding to our notices. These costs are usually the responsibility of the recipient of the notice, even if the notice is not an enquiry into their tax affairs. For example, we may issue a notice to a third party to produce documents.
If we issue a notice requiring someone other than the taxpayer or their representative to attend and give evidence, that person may be able to apply for payment according to a prescribed scale of expenses.
We will take your circumstances into account and try to limit the costs you incur – for example, if we issue you a notice to attend an interview, where possible we will conduct the interview at an ATO office close to you.
Special rules apply in cases when we use our notice powers to obtain information from other government agencies. This is because:
- there are differences between the laws these agencies administer and those administered by us
- the doctrine of public interest immunity may apply
- other reasons exist, including agreements not to disclose information to third parties.
Before we send a notice to obtain information from another government agency, we will usually find out if the information can be obtained from another source.
Notices requiring documents or information from a company will generally be addressed to that company.
However, notices to attend and give evidence are only issued to natural persons. Our notices to attend and give evidence for company-related tax affairs will generally be addressed to a person who is involved with the affairs of the company, such as a company officer. We may issue notices to any director, secretary, other officer, attorney or agent of the company if we believe that person has the information.
When issuing notices to a corporation, if the company officer does not know about the information required we may ask who is likely to have the information or knowledge of it.
We are required to recover unpaid tax that has fallen due. To do this, we may need to gather a broad range of information, including details of:
- your bank account and loan application details
- financial arrangements and transactions (including overseas transactions)
- business structures and their ownership and management
- assets held and disposed of
- monies owed to you.
Our approach to collecting a debt is generally guided by your past engagement with us. We also take your individual circumstances into account. If possible, we gather this information in cooperation with you or your representatives.
In some cases, we will use our notice powers to compel you, or a third party, to give the information to us – for example, where our cooperative approach has not worked, or third parties are subject to confidentiality arrangements.
We will usually notify you before making third-party enquiries about your debt. In some circumstances, we will not notify you, particularly when our collection activities could be compromised – for example, if we ask a financial institution about your account details so we can garnishee monies.
It is important for us to contact you to discuss collecting your debts, and where necessary commence action to recover the outstanding amounts. If we are unable to locate you, we may undertake a tracing action to find your new address. We are authorised to make relevant enquiries with the public at large in the administration of the tax laws to locate the address. The level of disclosure about your personal information is kept to a minimum when asking about you.
We may request information from various sources, including:
- your neighbours, employers, business associates, friends, accountants and solicitors
- trade organisations
- industry associations
- telecommunication service providers
- Australia Post
- Australian Securities & Investments Commission
- financial institutions
- super funds
- other government agencies
- local councils
- Land Titles Office
- State and Federal police and Corrective Services.
When making our enquiries, we will consider if we need to use our formal powers or whether we can gather the information using a cooperative approach. Given that the Privacy Act may apply to our third-party enquiries, we will usually only conduct these enquiries by issuing a formal notice.
Once we have commenced legal proceedings to recover a debt, we generally will not use our formal powers to obtain information for those proceedings.
However, in certain high-risk cases, we may use our formal powers where litigation has commenced. For example:
- information may be required to apply for a freezing order where summary judgment proceedings are in progress – that information would not be used to obtain judgment in the proceedings on foot, but rather to identify property against which a judgment in our favour may be satisfied
- a formal notice may be issued for tracing action when court proceedings have commenced, particularly where we seek information upon which to obtain an order for substituted service.
For more about the enforcement measures we use for the collection and recovery of tax related liabilities and other amounts, refer to PS LA 2011/18 - Enforcement measures used for the collection and recovery of tax-related liabilities and other amounts.