The Tax and Tax Return Process
The regular tax return process (ie from the time a taxpayer, whether an individual, company, trust or other entity, lodges an income tax return with the ATO to the time the assessment of the taxpayer’s tax liability is complete). The more basic steps in the tax return process are described below in general terms.
- Every taxpayer deriving income is obliged to lodge a tax return although, in practice, certain low income earners are not required to lodge a tax return.
- The appropriate tax return to be used depends on whether the taxpayer is an individual, a company, a partnership, a trustee of a trust estate or a superannuation fund, ADF or PST.
As part of the ATO’s increased emphasis on self-assessment by taxpayers, it issues a comprehensive tax return and information package (TaxPack) for use by individuals. Although, generally speaking, each tax return now calls for taxpayers to provide far less detail than in previous years, taxpayers must retain records to support their tax return in case they are required to verify the tax return during a subsequent audit.
- On receipt of the tax return, the Commissioner makes an “assessment”. The Commissioner ascertains the amount of taxable income and the tax payable on that taxable income. The Commissioner will then issue a notice of assessment based on the tax return lodged. In the case of companies, superannuation funds, ADFs and PSTs, which are subject to a full self-assessment system, the Commissioner does not issue a formal notice of assessment — on lodgment, their tax return is deemed to be an assessment.
There are special provisions for the amendment of assessments at the instance of the Commissioner or a taxpayer, and for default assessments, which may be issued by the Commissioner when a taxpayer does not lodge a tax return or when the Commissioner is not satisfied with the tax return that has been lodged
- Many taxpayers pay tax as they earn income, through the PAYG system . If the tax paid through the year exceeds the tax assessed, the taxpayer will be entitled to a refund (interest may be payable by the Commissioner on the amount refunded:If insufficient tax has been paid, the notice of assessment will advise the taxpayer of the additional tax payable.
- If the taxpayer is dissatisfied with the assessment resulting from lodgement of a tax return, an objection may be lodged within the applicable time limit. An ATO officer reviews the objection and then notifies the taxpayer of the decision. A taxpayer who is dissatisfied with the decision may, within the applicable time limit, either apply to the AAT or STCT for a review of the decision or lodge an appeal with the Federal Court. There may be further appeals to the Full Federal Court or, with special leave, the High Court.