Tax administration 

Income tax and GST liability do not spring from an independent government determination; they are largely worked out, in the first instance, by the taxpayer. This article explains the framework within which that happens — self-assessment, audit and amendment, and the pathway available to a taxpayer who disagrees with the result.

Self-assessment as the operating model

Australian income tax, and GST reporting for registered entities, both operate on a self-assessment basis. A taxpayer calculates its own assessable income, or for GST its own net amount for a period, and lodges a return or activity statement declaring that calculation. The tax administrator does not, as a matter of ordinary practice, independently verify every return before it takes effect: lodging the return is generally treated as the taxpayer notifying — and, in substance, assessing — its own liability, and that self-assessment stands unless and until the administrator or the taxpayer takes a further step.

Self-assessment shifts the practical burden onto the taxpayer to get the calculation right and to keep the records that support it, because the return is accepted on trust rather than checked line by line at the point of lodgment.

Audit and amendment

Because the taxpayer's own calculation stands unless reviewed, the administrator's central compliance tool is the audit — a review, conducted after lodgment, of whether a taxpayer's return correctly stated its assessable income, deductions or GST position. Where an audit or other review leads the administrator to conclude that a taxpayer's self-assessment understated or overstated the correct liability, the administrator can issue an amended assessment, correcting the figure. The taxpayer can also request an amendment where it discovers its own error. The circumstances in which an assessment can be amended, and the periods within which that can happen, are matters of considerable procedural detail set by the current legislation; a student should describe the existence of an amendment power rather than assume a specific time limit applies to any given case.

The role of the national tax administrator

Income tax and GST are both administered by a single national tax administrator, which processes returns and activity statements, conducts audits, issues assessments and amended assessments, and publishes rulings and other guidance on how it will apply the tax law to particular kinds of transaction. That guidance is useful evidence of administrative practice and a starting point for advice, but it is not itself the law: the administrator's view of how a provision applies can be tested, and is sometimes overturned, by an independent review body or a court applying the legislation and the case law in the usual way.

Disputing an assessment: objection first

A taxpayer who disagrees with an assessment — whether an original self-assessment the administrator has revised, or an amended assessment issued after audit — does not go straight to a court. The first step is an objection: a formal, written request to the administrator itself to reconsider the assessment, made in the approved form, lodged within the statutory period, and stating fully and in detail the grounds on which the taxpayer says the assessment is wrong.¹ The objection is decided by the administrator, though generally by a part of it functionally separate from the audit process that produced the disputed assessment.

Review and appeal

If the objection is unsuccessful, or only partly successful, the taxpayer generally has a further choice of external avenues: applying to an independent review body for a fresh merits review of the assessment, or pursuing the matter in a court. These pathways differ in cost, formality and in whether the reviewer can substitute its own view of the facts or is confined to questions of law, and the availability and time limits for each step are set out in the current tax administration legislation. This article deliberately does not state specific time limits for lodging an objection or seeking review, because those periods are procedural details that change and must always be confirmed against the current legislation rather than assumed.

Applying this in a problem question

1. Establish whether the taxpayer's position rests on an original self-assessment, an administrator-amended assessment, or an assessment already varied following an audit.
2. If the administrator has queried or amended a return, identify this as the audit and amendment process rather than an original assessment.
3. If the taxpayer wishes to dispute the outcome, the first available step is an objection to the administrator — do not skip straight to a court or tribunal on the facts.
4. Note that, if the objection fails, further external review is generally available, without asserting which specific body or court applies without checking the facts and the current legislation.
5. Never state a specific time limit for lodging an objection or seeking review — flag that it must be checked against the current legislation.