You lodge your tax return, expect the usual processing period, and then notice something unexpected: the ATO is reviewing your tax return.
For many Perth taxpayers, that message immediately raises questions.
Did I make a mistake? Will my refund be cancelled? Do I owe the ATO money? What documents do I need? Should I contact the ATO or wait?
The first thing to know is that an ATO review does not mean you have done anything wrong. The ATO uses data matching and other compliance processes to identify information that may need to be checked. If information does not match, the ATO may contact you so you can explain or verify the position.
What matters now is how you respond.
A rushed explanation, missing evidence, or an assumption that the ATO already has the full picture can make a straightforward review more difficult.
A well-prepared response, backed by the right documentation and guidance from tax agents in Perth, can help the ATO resolve the issue more efficiently.
Here is what you should do if your tax return is under review.
First, Understand What an ATO Tax Review Actually Means
An ATO review is generally about checking information in your tax affairs.
Australia operates under a self-assessment system. This means the ATO generally accepts the information in your tax return initially, but it can later review or audit a return where further information or analysis indicates that this is warranted.
A review can happen for different reasons.
For example, the ATO may identify:
- information that does not match third-party data
- an income amount that needs verification
- a deduction requiring supporting evidence
- an unusual change compared with previous returns
- information from another government agency or organisation
- an issue involving rental property or investment income
- a discrepancy between information reported by you and information held by the ATO.
The ATO’s data-matching programs are specifically designed to compare information from different sources and improve compliance. Importantly, the ATO states that being checked does not automatically mean it believes you are dishonest.
So, “under review” is not the same thing as “you owe tax”.
Step 1: Do Not Lodge Another Tax Return
This is one of the easiest mistakes to make when a tax return appears to be stuck.
If your return is showing as under review or requiring additional processing, do not simply lodge another return because you think the first one has disappeared.
The ATO explains that an income tax return can show statuses such as “Under review”, meaning the return is being manually reviewed. It also notes that a return can temporarily show as cancelled while it is being reviewed and that taxpayers should not lodge the return again because this can cause delays.
Instead, check the status through your ATO online services and read any correspondence carefully.
If the ATO has specifically contacted you for information, follow the instructions in that communication.
Step 2: Read the ATO Notice Carefully
Do not respond based on what you think the ATO is asking.
Read the actual notice.
Look for four things:
What is being reviewed?
The ATO may be checking one particular deduction, income source, or transaction rather than your entire tax return.
Which financial year is involved?
Make sure you are gathering records for the correct year.
What information is requested?
A request could involve documents, explanations, or both.
When do you need to respond?
Never assume you have unlimited time.
If the ATO has issued a formal notice requiring information or documents, the requirements can be more significant. The ATO says its formal notices may require taxpayers to provide information, produce documents or attend an interview and give evidence.
This is why the first step should always be understanding the request before preparing your response. If you’re unsure about what the ATO is asking or how to respond, seeking advice from experienced tax agents in Perth can help you avoid unnecessary mistakes.
Step 3: Find Out What Triggered The Review
You may not always be told immediately what triggered an ATO review.
However, the correspondence or information request will usually give you clues about the issue being examined.
One increasingly important factor is data matching.
The ATO receives information from a wide range of sources and uses data matching to identify discrepancies. For individuals, the ATO identifies incorrectly claimed deductions, particularly work-related and rental expenses, and omitted income as important contributors to the individual income tax gap.
This does not mean every deduction is suspicious.
It means the evidence needs to support the claim.
For example, if your return contains a substantial work-related expense, the question is not simply whether the amount looks large.
The ATO may want to establish whether you actually incurred the expense, whether it was connected with earning your income, and whether you have appropriate records to support it.
Step 4: Gather Evidence Before Explaining Anything
This is where many taxpayers approach a review backwards.
They write a long explanation first and then try to find documents afterwards.
A better approach is:
records first, explanation second.
Depending on the issue, your records might include:
- invoices and receipts
- bank statements
- employment records
- rental property statements
- investment records
- work-related expense evidence
- vehicle records
- loan documents
- contracts
- accounting records
- correspondence relating to a transaction.
The right evidence depends entirely on what the ATO is reviewing.
For example, if the issue concerns a rental property expense, gather the documents relating to that expense and the property.
If the issue concerns income, establish where the income came from and reconcile it against the information in your tax return.
If the issue concerns a deduction, establish how the amount was calculated and whether the records support it.
Step 5: Compare Your Records With The Lodged Return
Do not assume that because you lodged the return, the figures must be correct.
Review the relevant section yourself.
Check:
- the amount reported
- the source of the amount
- the calculation
- supporting documents
- any private-use component
- whether the amount was reported in the correct financial year.
This can reveal something important before you respond.
You might discover that the ATO’s information is incorrect.
You might discover that your return is correct, but the ATO needs additional evidence.
Or you might discover that an error was actually made.
These are three very different situations, and each requires a different response.
Step 6: If the ATO’s Information Is Wrong, Explain Why
Sometimes a review begins because the ATO’s information does not match yours.
That does not necessarily mean your return is incorrect.
For example, a third party may have reported information differently, a transaction may have been attributed incorrectly, or there may be an issue with how information was recorded.
The ATO’s data-matching process allows taxpayers an opportunity to verify information before administrative action is taken. In one of its data-matching programs, the ATO states that taxpayers may be given up to 28 days to verify information and respond.
If the information is incorrect, do not simply say:
“The ATO is wrong.”
Explain the discrepancy and provide evidence.
A strong response answers three questions:
What does the ATO believe?
What is actually correct?
What evidence proves the difference?
That makes it easier for the officer reviewing the matter to understand your position.
Step 7: If You Made A Mistake, Do Not Ignore It
Finding an error in your tax return can be uncomfortable.
But ignoring an identified error will not make it disappear.
If you discover that you reported something incorrectly, the appropriate action may involve amending your tax return or addressing the issue directly with the ATO.
The correct approach depends on the nature of the error.
For example, there is a significant difference between:
- forgetting to include a small amount of income
- claiming a deduction incorrectly
- misunderstanding a tax rule
- incorrectly calculating an amount
- deliberately providing false information.
Do not try to rewrite the history of the transaction.
Establish what happened, determine the correct tax treatment, and address the issue properly.
Step 8: Do Not Send Irrelevant Documents
More documents do not necessarily mean a better response.
If the ATO asks for evidence supporting a particular deduction, sending hundreds of unrelated pages may make the issue harder to understand.
A better response is targeted evidence.
Organise your documents so that the reviewer can see:
- what the transaction was
- when it occurred
- how much was involved
- why it relates to the tax issue
- how the amount was calculated.
This is particularly important for taxpayers who have multiple income sources, investments, rental properties or business activities.
Step 9: Keep A Record Of Everything You Send
Once you respond, keep copies.
Save:
- the original ATO correspondence
- your response
- supporting documents
- dates of communication
- names or details of relevant contacts
- any follow-up requests
- subsequent ATO decisions or notices.
Do not rely on your email inbox alone.
Create a dedicated folder for the matter.
If the review continues or additional questions arise, having a complete record can save considerable time.
Step 10: Consider Using A Tax Agent Before Responding
You do not need a professional adviser for every minor ATO query.
But professional assistance can become valuable when the issue is unclear, the amount involved is significant, or you are concerned about the consequences of your response.
A registered tax agent can help you:
- interpret the ATO’s request
- identify the actual issue
- review your original tax return
- reconcile the relevant figures
- identify missing evidence
- prepare a response
- determine whether an amendment may be appropriate
- communicate with the ATO on your behalf where authorised.
For more complex matters, this can be very different from simply having someone lodge your annual tax return.
What If The ATO Asks For Information You Do Not Have?
Do not invent it.
This is particularly important where the ATO requests documents from several years earlier.
Start by looking for alternative evidence that can establish the transaction.
Depending on the circumstances, this could include bank records, invoices, contracts, statements or other contemporaneous documentation.
If you genuinely cannot provide the requested information, communicate that clearly and explain why.
If the request is a formal notice, the consequences of failing to comply can be more serious.
The ATO states that failure to comply with certain formal notices, or providing false or misleading information, can have legal consequences.
What If You Cannot Meet the ATO’s Deadline?
Do not wait until the deadline has passed.
Contact the ATO as early as possible and explain the circumstances.
For formal notices, the ATO says taxpayers can request an extension in writing and should provide the reasons they cannot comply on time and propose an alternative date.
Whether an extension is granted depends on the circumstances.
The important lesson is simple:
Silence is rarely a good strategy.
What Happens After You Respond?
Once the ATO receives your information, several things can happen.
The ATO accepts your explanation
If the evidence resolves the issue, the review may be finalised without an adjustment.
The ATO asks further questions
The information you provide may lead to another question or request for supporting evidence.
That does not necessarily mean the situation has become worse. It may simply mean the ATO needs more information to reach a conclusion.
The ATO changes your assessment
If the ATO determines that your original tax position was incorrect, it may amend your assessment.
An amendment could increase your tax liability, reduce a refund or otherwise change the outcome of your return.
Penalties or interest may become relevant
Whether penalties apply depends on the circumstances.
The ATO can impose administrative penalties where taxpayers do not meet certain tax obligations, including making false or misleading statements.
The ATO also has discretion to remit some penalties depending on factors such as compliance history and the circumstances that led to the shortfall.
This is one reason why responding matters carefully.
What If You Disagree With The ATO’s Decision?
An ATO decision is not necessarily the end of the matter.
Depending on the decision, you may have rights to object or seek a review.
The appropriate pathway depends on what decision the ATO has made and the relevant tax law.
If you believe the ATO has misunderstood your circumstances, review the decision carefully rather than simply accepting an adjustment because you find the process intimidating.
For more complicated disputes, professional tax advice can help you understand whether an objection or another review pathway is available.
How Long Can The ATO Review A Tax Return?
There is no single answer for every taxpayer.
For most taxpayers with relatively simple affairs, the general amendment period is two years from the date the assessment is issued. For taxpayers with more complex affairs, the period is generally four years. Different rules can apply in particular circumstances, including where the Commissioner forms an opinion of fraud or evasion.
This is one reason taxpayers should not assume that once a refund has arrived, the tax return can never be questioned again.
Keep your records.
7 Mistakes To Avoid During An ATO Tax Review
1. Ignoring the correspondence
A review will not necessarily disappear because you do not respond.
2. Responding emotionally
Being worried or frustrated is understandable. Your response should still be factual and evidence-based.
3. Guessing an answer
If you do not know, check the records.
4. Sending unsupported explanations
An explanation without evidence may not resolve the issue.
5. Providing irrelevant information
Give the ATO what it has asked for and explain the relevance of your evidence.
6. Creating records after the fact
Do not manufacture or alter documents to support a claim.
7. Waiting until the deadline
If you need help or additional time, act early.
FAQs About ATO Tax Return Reviews
Why is the ATO reviewing my tax return?
There can be many reasons. The ATO may identify a discrepancy through data matching, need to verify information, or identify a tax issue that requires further examination. Being reviewed does not automatically mean you have done something wrong.
Does an ATO review mean I will lose my tax refund?
Not necessarily. The final outcome depends on what the ATO finds and whether the information in your return is supported.
How long does an ATO review take?
There is no universal timeframe. It depends on what is being reviewed, how complex the issue is, and whether the ATO needs additional information.
Should I contact the ATO if my tax return is under review?
If the ATO has requested information, you should follow the instructions provided. If you are unsure what the request means or how to respond, consider getting professional advice before replying.
Can a tax agent deal with the ATO for me?
Where properly authorised, a registered tax agent can communicate with the ATO and assist with your tax affairs. This can be particularly useful when a review involves technical questions or significant amounts.
What happens if I disagree with an ATO adjustment?
Depending on the decision, you may have formal objection or review rights. The appropriate process and time limits depend on the specific decision, so it is important to act promptly.
What records should I keep if my return is reviewed?
Keep the documents relevant to the issue being reviewed, along with your tax return, ATO correspondence and any responses you provide. The specific records depend on the type of income, deduction or transaction involved.
Final Takeaway
An ATO review can be uncomfortable, but the phrase “under review” does not mean “you have done something wrong.”
The most useful response is not panic. It is preparation.
Read the ATO correspondence carefully. Identify what is actually being questioned. Gather the evidence. Reconcile the figures. Respond to the specific issue. Keep copies of everything.
And if the matter is complex or you are unsure about your position, get professional advice before responding.
Need Help With an ATO Review?
When an ATO review raises questions about your income, deductions or supporting records, having someone experienced review the issue can take much of the uncertainty out of the process.
Perth Tax People has more than 15 years of experience supporting individuals, sole traders and businesses with tax and accounting matters, backed by registered tax agent expertise.
Our experienced team can help you understand what the ATO is asking, review the relevant tax position, and work through the evidence and response with you.
If you are looking for experienced tax agents Perth taxpayers can turn to when an ATO question becomes more complicated than a routine tax return, Perth Tax People can help make the next step clearer.
Take the uncertainty out of an ATO review. Contact Perth Tax People today to discuss your situation with an experienced tax professional.