If you fail to lodge your tax return for a particular year, or the ATO has reasonable cause to amend the return that you have submitted, you may be issued a default or amended tax assessment.
As income-earning individuals in Australia, we have a responsibility to ensure that we correctly pay our taxes, and this includes lodging a yearly tax return (or advising the ATO that Return Not Necessary) to reconcile the amount of tax that has been paid, or is payable for our individual situation.
Why Might I Receive an Amended or Default Tax Assessment?
A default tax assessment is issued for failing to meet your lodgement obligations. That is, not lodging your tax return on time, or in some cases failing to lodge a tax return at all.
An amended tax assessment can be issued where you are unable to provide, or do not supply within the specified timeframe, the additional information that is required to substantiate a previously lodged tax return.
In summary, if you fail to meet your lodgement obligations by submitting a tax return as and when it is due, or if a previously submitted tax return requires further review and you do not provide additional information to substantiate the return, then you are likely to receive a default or amended tax assessment.
Will I always receive a warning?
Obviously, the best way to avoid receiving a default or amended tax assessment is to correctly and lawfully pay your taxes and submit your tax return each year.
In the event that you have not met your tax paying obligations in someway, the ATO will often try to work with the taxpayer in the first instance to ensure that lodgement obligations are met and/or that they are given the opportunity to provide additional information to support a submitted tax return and existing tax assessment that is being queried.
The first step is usually that you will be issued a warning letter advising the details of your default or amended tax assessment and providing instructions as to what needs to be done in order to avoid the default or amended tax assessment being issued and the timeframe that it is required to be completed in.
If the initial attempts at a cooperative approach are unsuccessful, that is, you do not take the appropriate action as outlined in the warning letter/s the ATO will then proceed to issue a default or amended tax assessment.
However, in certain circumstances it is possible for a default assessment to be issued without warning. If the taxpayer is a flight risk (for example, the taxpayer is likely to leave the country), there is risk of dilution of assets (for example, assets are likely to be transferred) or movement of funds outside Australia (for example, a non-resident is selling their sole Australian asset) or there is an urgency to issue the assessment (for example, to issue an amended assessment within the period of review), then there will be no warning letter and opportunity for the taxpayer to remedy before the default tax assessment is issued.
If you have received a warning letter in regards to default or amended tax assessments, it is important that you contact the expert team of tax lawyers and tax accountants at The Quinn Group as soon as possible. We can help you to liaise with the ATO and work to bring your tax obligations up to date, hopefully avoiding amended or default assessments being issued.
Hefty Fines Apply to Default Tax Assessments
It is important to take prompt action upon receiving a warning letter. That is your chance to remedy the situation before it becomes necessary for a default or amended tax assessment to be issued. Once the default or amended tax assessment is issued, there are usually significant penalties and hefty fines applied in addition to the tax obligation. The taxpayer may be liable for administrative penalties for failure to lodge, making false or misleading statements or lodging an objection without reasonable grounds. Hence, you should seek to resolve any outstanding tax obligations in a timely manner so as to avoid receiving a default or amended tax assessment and the subsequent related penalties and fines.
What Should I Do If I Receive an Amended or Default Tax Assessment?
If you fail to resolve the outstanding issues as detailed in your warning letter, or do not receive a warning letter, and a default or amended tax assessment is issued, you may agree and or disagree with it.
If you agree with the default assessment then you should pay the amounts notified or contact the ATO to discuss making a payment plan.
If you don’t agree with the default assessment, you can lodge an objection to it.
You may also consider objecting to the associated assessment of penalty.
When lodging an objection, you must be able to state in detail why you are dissatisfied with the assessment and be able to provide evidence to support your claims.
In calculating a default assessment the ATO will consider:
- previously-lodged tax returns and activity statements
- income received from financial institutions and government bodies
- salary or wages reported by employers
- gross domestic product (GDP) growth rate
- small business benchmarks for similar businesses
- annual tax statistics
- any other relevant information available to them.
Take Action to Avoid Further Penalties
If you have received a warning letter, or an amended or default tax assessment from the ATO, contact the experienced team of tax lawyers and tax accountants at The Quinn Group right away. We will review your situation and work with you, and the ATO, to determine the best possible solution.
Call us on (02) 9223 9166 or submit an online enquiry form today.