The ATO calls. Your client panics. Two weeks later, a review notification lands. The meter starts running.
Most practitioners know the basics. But understanding which program triggered the contact, what data the ATO already holds, and where the process is heading that is where the real advantage lies.
The ATO's Compliance Machine
The Compliance and Engagement Group runs targeted programs.
1. Private Wealth: Top 500, Next 5,000, and Medium and Emerging target groups by turnover, assets, and wealth. Targets include property disposals, trust distributions, Division 7A, and losses.
2. Small Business: benchmarks, TPAR data matching, and shadow economy program for businesses up to $10M turnover.
3. Fraud and Criminal Behaviours: AUSTRAC referrals, offshore arrangements, phoenixing. Formal process with limited negotiation.
4. Individuals: computerised risk checks flag large work-related deductions, rental losses, and unexplained wealth.
The ATO cross-matches data from banks, title offices, AUSTRAC, employers, and online platforms. If deposits do not match reported income, they likely already know.
Review vs Audit
A review assesses risk. An audit means the ATO believes there is a problem. Most matters start as reviews but can escalate without warning.
Key points:
1. Ask why the client was selected. The ATO Charter requires transparency. The Deputy Commissioner in the signature block tells you which business line is running it.
2. Check the amendment period. If they are reviewing years outside it, they may be considering fraud or evasion. Clarify immediately.
3. Voluntary disclosure during review reduces penalties by up to 80%. Once it escalates, that window narrows.
4. The ATO can record calls.
Practical Lessons
1. Preparation costs less than response. Proper trust resolutions, compliant Division 7A loans, reconciled BAS figures, and documented CGT calculations are your first defence.
2. Know what is compulsory. Formal notices under section 353-10 of Schedule 1 to the Tax Administration Act 1953 compel production. During reviews, many requests are informal.
3. Position papers are your opportunity. In audit, the ATO issues one before assessment. Present the technical case before they commit.
4. Settlement follows litigation risk. The ATO's Code of Settlement governs. Settlements are based on expected recovery, not sympathy.
5. Objection rights survive. 60 days from assessment. If that fails, the Administrative Review Tribunal and Federal Court remain available.
The best strategy has not changed: get the position right, document it, and engage early if the ATO comes knocking.
What is the most common ATO compliance issue you are seeing right now?
General information only. This note was written as at 30 March 2026 and the law may have changed since. It is not legal or tax advice, does not take account of your circumstances, and must not be relied upon as a substitute for advice on your own matter.