Tax audits frighten most taxpayers and tax agents. They cost time and money. And you never know for sure how it will end.
Tax Audits
Most disputes have been through a review before they escalate to a tax audit. However, when needed the ATO may proceed straight to an audit without conducting a review.
Legislative Powers
There is no specific legislation governing tax audits as such. Rather, the Commissioner’s obligation to investigate taxpayers is based upon the Commissioner’s general legislative directives to administer taxation laws.
Legislation, however, is necessary in respect of granting the Commissioner certain rights, such as access rights. The Taxpayer’s Charter sets out the conduct of a tax investigation.
A crucial aspect of a tax audit is the Commissioner’s ability to access information and premises (under s 263 of ITAA36) and require persons to furnish information and provide evidence (under s 264 of ITAA36)
Full and Free Access
The Commissioner and authorised delegates have the legislative right under s263 of ITAA36 to full and free access to all records, books, documents and files. In addition they have the right to full and free access to any place or building.
Building occupiers are to provide the Commissioner with reasonable facilities and assistance with respect to allowing access to records, including:
- Unlocking doors, safes, filing cabinets etc or providing the Commissioner with the ability to unlock physical barriers, using for example, keys and access passes
- Access to a computer terminal including logins and passwords, to access electronic records
- Place to work, such as a desk with adequate lighting
- Telephone and photocopier, if available on site
Reasonable Force
Where physical or electronic barriers prevent access to records, the Commissioner is able to use reasonable, but not excessive force, to overcome such barriers. For example, a locksmith may be engaged to open doors where the occupier is unable or unwilling to provide access.
Taxpayer’s Charter
Section 263 of ITAA36 does not seek to describe circumstances where the Commissioner’s broad powers can be used.
However, the Taxpayer’s Charter does state that the Commissioner’s preferred approach is to consult with taxpayers and obtain records cooperatively without resorting to the Commissioner’s legislative powers.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.