Default assessments may be issued to a taxpayer in instances when a tax return has not been lodged for a particular income year or where the Australian Taxation Office (ATO) is dissatisfied with a lodged tax return. An amended or default assessment will be based upon the amount on which the ATO determines that income tax should be assessed on.

The ATO is not required to provide an explanation of how the assessable income on the default or amended tax assessment is calculated. Rather the ATO will utilise a range of audit techniques to determine a default taxable income. The techniques used by the ATO may include a review of third party information, reference to previous year’s tax returns and utilisation of industry benchmarks.

Once a default or amended tax return is issued the taxpayer may either accept the amount determined by the ATO or if they believe it is excessive they may challenge it. However, the onus of proof falls on the taxpayer to demonstrate that the assessment is excessive. This means that ATO is not required to defend its default or amended assessment, rather the taxpayer has to prove that the amount provided in the assessment was excessive.

A taxpayer may demonstrate that an amended or default assessment is excessive by showing:

  • the amount of the taxable income or net income
  • the tax payable on that taxable income or net income (or that no tax is payable) or
  • the total of the taxpayer’s tax offset refunds (or that the taxpayer can get no such refund).

The onus of proof requirement poses a challenge for taxpayers to object the default assessment successfully. Additionally, there are potential penalties that may apply in relation to a default assessment. The taxpayer may be liable for administrative penalties for failure to lodge, making false or misleading statements or lodging an objection without reasonable grounds.

If you have received an amended or default tax assessment and you feel that it is excessive or unfair contact us at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.

We will have our Tax Lawyers and Tax Accountants review it for you.