Back in the good old days when Australia’s population was much smaller and the highpoint of technology was a calculator with an adding machine roll all tax returns went on paper and each of these tax returns was scrutinised by a tax officer before the assessment was issued. I think that the scrutiny that was done by Tax Officers was sometimes fairly scanty because I have since been informed that their target was 100 a day. That was a very quick look considering that group certificates had to be checked, arithmetic had to be checked and we had “concessional deductions” which all required a cross checked schedule that was attached to the return

Some years ago the emphasis changed and the system of self assessment was introduced.

Technically speaking this means that your tax return is assessed before it reaches the Tax Office, and it is assessed by you, the taxpayer. That’s a bit like having an honour box where you put your money in a tin to pay for lollies on the front counter or green fees at a golf club in the bush where they do not have full time staff.

The only difference is that this is a bit like an honour box with a security camera attached so that the cheats can be captured on film.

When your tax assessment issues no one in the Tax Office has checked it. This checking occurs much later, by some very sophisticated scanning methods which are designed to pick out anything that departs from the norm, or by a data matching process to ensure that all income is returned.

Back in those “good old days” that I was referring to all banks and financial institutions had to report to the ATO on all depositors who were paid more than $100 in interest. These days ALL interest, which is coupled with a tax file number, is reported to the Tax Office. If it is not coupled with a tax file number it doesn’t matter because the Bank is obliged to deduct withholding tax at the rate of 48.5%

The audit procedure starts when something looks odd or is missing from the original return.

It’s a very good idea to get it right first time. The penalties really bite. Even if there are no penalties involved you could be excused for thinking that there is a penalty when you get an interest bill, COMPOUNDING DAILY, which dates back a year or so at a rate that matches the local pawn shop.