Your responsibilities as a taxpayer

Contributed by AnnetteMorgan and current to 27 July 2018

Most taxpayers operate on a system of self-assessment which means that, for the most part, you will be responsible for preparing your tax return and assessment of tax. As such, it will be your responsibility to maintain records in a particular way for a number of years. It is particularly important when you are claiming deductions, which are subject to strict substantiation requirements (see below), that you can establish that an item you claimed as a deduction did in fact exist and that the amount you claimed was the amount you actually incurred. Further, the policy of self-assessment means that the ATO accepts at face value the information in your tax return. Therefore, you determine whether an item is an allowable deduction or assessable income. However, you should remember that penalties may be imposed if you make a wrong decision.

The ATO conducts both systematic and random audits to ensure that taxpayers comply with their responsibilities. The conduct of an audit may vary but, if you are subject to one, you will be asked to produce all necessary documentary evidence to establish that your taxation returns have been prepared in a true and correct manner.

The tax return instruction guides contains a guarantee from the ATO that, if you carefully and honestly follow the instructions provided in the guides in the preparation of your return, you will not be charged a penalty should you make an honest mistake. Additionally, you can rely on the rights provided in the Taxpayer’s Charter published by the ATO. It sets out your rights and obligations, as well as the ATO’s service standards, dealing with various topics, including confidentiality, fair and reasonable treatment, and truthfulness. You can obtain a copy of the Charter from the ATO on 13 28 61 (local call), or from the ATO website.

The need for professional advice

As noted, taxation law is extremely lengthy and complex. In addition, the ATO issues numerous administrative interpretations in the form of Taxation Rulings and Determinations. Though Rulings and Determinations are only the ATO’s considered view, and therefore not law, the ATO is now bound to follow those issued after 1 July 1992 if you have acted in reliance on them. You are able to disregard Rulings and Determinations, but the risk of penalties being imposed on you is increased if the view you take is incorrect.

This, plus your self-assessment responsibilities, means that it may be important for you to obtain professional taxation advice, particularly when completing a tax return. You may wish to consult a registered tax agent, although at times it may be appropriate to see a lawyer. You can obtain a tax deduction for amounts you spend in managing your tax affairs. This includes the preparation of your income tax returns by tax agents and the taxation advice you receive from tax agents and lawyers.

If you are a low-income earner you can use Tax Help, which is a free and confidential service provided by the ATO and is staffed by volunteers who can assist you in the preparation of your tax returns. For this assistance, ring the Personal Tax Enquiries line on 13 28 61 (local call).