Self assessment is fundamental to the Australian Taxation System. But what does it mean and how does it operate?

In Australia, income tax self assessment is a system where individuals and businesses are responsible for determining their own tax liability and reporting it to the Australian Taxation Office (ATO). This means that they are required to complete their own tax returns and calculate their own tax liability, rather than having it done by the ATO.

Under the self assessment system, individuals and businesses are required to report their income from all sources, including wages, investments, and business income. They must also report any deductions, such as work-and business related expenses, that they are entitled to claim.

The ATO provides a range of tools and resources to help individuals and businesses complete their tax returns which assist them through the process of completing their tax return and provides tailored information and support. The ATO also provides free tax return preparation assistance for eligible individuals through the Tax Help program.

All taxpayers are required to lodge their tax return by the due date, which is typically 31 October after the end of the financial year however by using an accountant to prepare and lodge your personal and/or business income tax returns, extension for lodgements are generally available until 15 May.

If the return is not lodged their tax return by the due date, they may be subject to penalties and fines. If the tax return is not completed correctly or they have understated their tax liability, they may also be subject to penalties and fines.

Overall, the self-assessment system allows individuals to have more control over their tax affairs, but it also places a greater responsibility on them to ensure that their tax returns are accurate and lodged on time.

In effect, the ATO will accept whatever information you put in your tax return however every taxpayer and every return has the potential to be subject to audit. In an audit environment, if you are unable to provide evidence to support what’s included in your tax return then expect that the ATO will amend your tax return and likely apply additional tax and penalties. Please contact us to find out how working with us will have a positive impact upon your business.