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ATO implements new tax program

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The tax office has launched a new initiative to give taxpayers an early heads-up that their recently submitted tax returns are in good shape and won't be subject to further review.

The pilot program will see the ATO write to 500,000 taxpayers with straightforward tax affairs and an income of less than $180,000.

Legally, the ATO has up to two years from the date of lodgement to come back to a taxpayer if it identifies a discrepancy or other problem that it wants to review or audit. In the past, taxpayers had no comfort that they weren't going to be contacted out of the blue until the two years had expired. Worse still, in some cases that period is extended to four years.

new tax program

The aim of this new program is to remove that uncertainty and give taxpayers comfort that their tax affairs for the year have been finalised.

The ATO has been quick to point out that as this is a limited pilot program, not receiving one of these letters is not an indication that it is taking a close interest in you! If this limited scheme is a success, the initiative may be expanded to include more taxpayers next year.

Tax advisers have issued a word of caution, however. While welcoming the letters as an example of good customer service, the letters don't (and in fact can't) override the law. If the ATO finds something at a later date that it wasn't aware of when it wrote to you, it is not prevented from reviewing your affairs, regardless of what it said in the letter. So, in reality, getting that letter might not quite give you the comfort you're seeking.

Mark Chapman is director of tax communications with H&R Block. He can be contacted at mchapman@hrblock.com.au.

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Mark Chapman is director of tax communications at H&R Block, Australia's largest firm of tax accountants, and is a regular contributor to Money. Mark is the author of Life and Taxes: A Look at Life Through Tax.
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