ATO Fraud or Evasion: How Far Back Can the ATO Amend Your Tax Returns?

Velocity Legal

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Key Insights

Fraud or evasion can remove the usual amendment period. Most taxpayers rely on the fact that the ATO only has a limited period to amend an income tax assessment. However, if the Commissioner forms the opinion that there has been fraud or evasion, the Commissioner may be able to amend an assessment at any time. That can bring older income years back into dispute, including years where taxpayers may no longer have easy access to records, emails or adviser correspondence.
Evasion is more than just getting the tax position wrong. A tax return can be incorrect without necessarily involving evasion. The difficult question is whether the conduct involved something more blameworthy than an innocent mistake, misunderstanding or arguable position. In Kirtlan, the taxpayer’s residency position may have been wrong, but the Tribunal accepted that reliance on a properly informed accountant provided a credible explanation for the way the returns were lodged.
The quality of the advice and the facts given to the adviser matter. Relying on an adviser is not a complete answer if the adviser was not given the full picture. Taxpayers should make sure their accountant or tax lawyer has all relevant facts before advice is provided, especially in areas such as tax residency, offshore income, trusts, private companies and historical transactions. Written advice, clear instructions and contemporaneous records can become critical if the ATO later alleges fraud or evasion.

Contents

Most taxpayers assume that once the usual amendment period has passed, an old tax assessment is effectively closed. A fraud or evasion opinion can change that.

For many taxpayers, the ATO generally has either two years or four years to amend an income tax assessment. But if the Commissioner forms the opinion that there has been fraud or evasion, those ordinary time limits may fall away, allowing the ATO to revisit much older income years.

In this episode of Explain That by Velocity Legal, Andrew Henshaw is joined by Tyson Bateman to discuss what fraud or evasion means in Australian tax law, why these allegations can change the course of an ATO dispute, and what taxpayers should consider when the ATO raises concerns about older assessments.

The discussion covers:

the ordinary two-year and four-year amendment periods;
why fraud or evasion can allow the ATO to amend outside those time limits;
the difference between an incorrect tax position, evasion and fraud;
why evasion can be difficult to identify in practice;
how the ATO forms a fraud or evasion opinion;
the Administrative Review Tribunal’s decision in Kirtlan and Commissioner of Taxation;
reliance on accountant advice in tax residency disputes;
why advisers need to be fully informed before advice is relied on;
the importance of records, emails and contemporaneous evidence; and
why engaging with the ATO before an amended assessment is issued can matter.

This episode is useful for taxpayers, business owners, private clients, accountants and advisers dealing with ATO audits, tax residency issues, amendment period disputes or fraud and evasion allegations.

For advice on an ATO audit, tax dispute, fraud or evasion allegation, amendment period issue or tax residency dispute, contact Velocity Legal’s Tax team.

This podcast in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this podcast.

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