17/12/2025 • 18 min read
Excessive ATO Assessment: Rights to Object (2025)
Excessive ATO Assessment: Rights to Object (2025)
An excessive ATO assessment can be challenged, and Australian taxpayers have a clear legal right to object—provided the objection is lodged within the strict time limits, states fully and in detail the grounds relied upon, and is supported by evidence. From an Australian accounting practice perspective, the fastest path to a correct outcome is usually to combine (1) an on-time objection under Part IVC of the Taxation Administration Act 1953 (TAA 1953) with (2) an immediate evidence pack that reconciles to bank statements, BAS, PAYG/SG records and the tax return labels that drove the ATO adjustment.
What does “excessive ATO assessment” mean in practice?
An “excessive assessment” means the assessment is higher than what is properly payable under Australian tax law, based on the correct facts and application of legislation. In practice, this typically arises from data-matching, audits/reviews, default assessments, or adjustments to income/deductions/GST where the ATO considers records insufficient.
- ATO includes deposits as income without recognising transfers, loans, capital contributions, or GST-inclusive amounts.
- Denial of deductions due to substantiation issues (rather than true ineligibility).
- GST/BAS discrepancies driven by timing (cash vs accrual) or misclassification.
- Division 7A deemed dividend outcomes from shareholder loan accounts not properly evidenced (Division 7A rules in the Income Tax Assessment Act 1936 are frequently implicated).
- Default assessments where returns were not lodged and ATO estimates are used.
What are your rights to object to an ATO assessment?
You have a statutory right to object to certain ATO decisions, including assessments, under Part IVC of the TAA 1953. The objection process is not discretionary; it is a formal merits-review pathway established by law.
- Taxation Administration Act 1953 (TAA 1953), Part IVC: Objections, review and appeal rights framework.
- Income Tax Assessment Act 1936 and 1997: Substantive liability provisions (income, deductions, anti-avoidance, Division 7A, etc.).
- ATO objection guidance: The ATO’s published objection process requirements (including “state fully and in detail” grounds and lodge on time).
- The right to lodge an objection within time.
- The right to provide supporting evidence and legal argument.
- The right to an independent review pathway if the objection is disallowed (ART or courts).
- The right to request reasons and clarification of the ATO position, and to be treated in accordance with the ATO’s administrative law obligations.
When should you object rather than “just explain” to the ATO?
You should lodge a formal objection when the ATO has issued an assessment or an objectionable decision and you disagree with the outcome. Informal engagement (phone calls, documents, “please reconsider”) is often useful, but it does not preserve rights if the objection deadline is missed.
- Assessment issued and wrong: lodge objection early, then continue discussions in parallel.
- Audit/review still in progress (no assessment yet): engage cooperatively and provide evidence before the assessment issues, but prepare an objection-ready file.
What are the time limits to object in Australia (and why do practices miss them)?
Objection time limits vary by decision type and taxpayer circumstances. The ATO specifies the period on the notice of assessment/decision and in its objection instructions.
- Missing the objection deadline can materially reduce options, forcing reliance on discretionary extensions or narrower amendment pathways.
- An extension of time may be sought, but it is not automatic and must be justified.
- Evidence quality and the reason for delay will matter.
How do you lodge a valid objection that the ATO must consider?
A valid objection must meet formal requirements under Part IVC and ATO procedural rules.
- Identify the assessment/decision being objected to (notice details, date, amounts).
- State the outcome sought (amended taxable income, GST net amount, penalties/remission, etc.).
- State “fully and in detail” the grounds relied on (facts + law + application).
- Attach evidence and reconciliations (or clearly state what will follow and when).
- Be lodged within time (or include an extension request with reasons).
- Bank statements reconciled to ledger and return labels.
- Source documents for large/contested deductions (invoices, contracts, logbooks).
- BAS workings and GST classification support.
- Payroll evidence (STP reports, PAYG withholding reconciliations).
- Division 7A loan agreements, benchmark interest calculations, MYR schedules, and journals where relevant (per ATO guidance on Division 7A administration and benchmark rates).
- Contemporaneous notes that explain unusual transactions (asset sales, insurance proceeds, trust distributions).
What is the “burden of proof” and why does it matter for excessive assessments?
In tax disputes, the taxpayer generally bears the onus of proving the assessment is excessive and what the correct amount should be. This is a decisive practical point: it is not enough to show the ATO might be wrong—you must establish the proper position with credible evidence.
- Build an “assessment-to-truth” reconciliation: ATO adjustment item → correct tax treatment → evidence → legislative support.
- Address each adjustment separately (income, deductions, GST, penalties, interest).
- Quantify the corrected outcome, not merely critique the ATO.
How do penalties and interest work when an assessment is excessive?
Even where an assessment is excessive, penalties and interest can continue to accrue unless managed. The law and ATO practice allow for remission in appropriate circumstances, but the client must actively address it.
- Shortfall penalties: Often tied to behaviours (lack of reasonable care, recklessness, intentional disregard). ATO penalty guidance and administrative practice statements are relevant.
- General interest charge (GIC): Accrues on unpaid amounts; remission may be available in limited circumstances (for example, where delays are attributable to the ATO or exceptional events).
- Failure to lodge on time (FTL) penalties: May be present in default assessment contexts.
- Lodge objection to challenge primary tax.
- In parallel, request penalty remission and (where justified) GIC remission with a tight factual narrative and supporting chronology.
- Negotiate a payment arrangement to prevent enforcement escalation while the dispute runs (where cashflow constraints exist).
What happens after you lodge an objection?
After lodgment, the ATO will review the objection and issue an objection decision: allowed in full, allowed in part, or disallowed. The ATO may request further information.
- The objection is concise but complete, with numbered grounds and exhibits.
- The evidence pack is “audit-ready” (bank rec, working papers, and label mapping).
- The legal basis is cited clearly (relevant ITAA provisions, substantiation rules, Division 7A provisions, GST law where applicable).
What if the ATO disallows the objection?
If the ATO disallows (or partially disallows) the objection, you can generally proceed to external review.
- Administrative Review Tribunal (ART): Merits review (successor to the AAT, now operating under the current administrative review framework as of 2024–2025).
- Federal Court appeal: Generally on questions of law (and procedure), with formal litigation risk.
- Litigation steps can be evidence-intensive and costly; many matters settle once the evidentiary record is properly assembled and the ATO technical position is tested.
Can you stop paying while objecting?
Objecting does not automatically defer the requirement to pay. The ATO can continue to treat the debt as payable, and interest can accrue.
- Request a payment arrangement pending the objection outcome.
- Seek deferral of recovery action in appropriate cases.
- Consider release options for individuals in serious hardship (where the relevant criteria are met and supported by evidence).
- Ensure BAS and current obligations remain compliant to maintain negotiation leverage.
What are the most common reasons the ATO assessments are “excessive” (and how do you fix each)?
- Trading income
- Inter-account transfers
- Loan proceeds
- Capital introduced
- Insurance proceeds
- GST-inclusive receipts (with correct netting for GST where applicable)
- Supplier statements, copies of invoices, and bank evidence
- Asset registers and depreciation schedules
- Motor vehicle logbook and business use calculations (where required)
- BAS labels to transaction-level GST coding
- Cash vs accrual basis application
- Adjustments (bad debts, change in creditable purpose, etc.) under GST rules
- Reconstructing the shareholder loan account with correct journals
- Producing compliant loan agreements where available and applicable
- Calculating benchmark interest and MYR schedules per ATO-published benchmark rate guidance and Division 7A administrative expectations
- Quantifying any deemed dividend exposure and proposing corrective action (where possible)
What real-world scenarios do Australian accounting practices see?
- Producing a bank-reconciled deposit analysis.
- Identifying that $260k are inter-account transfers and $80k are loan drawdowns.
- Demonstrating that only $80k is trading income, with GST correctly extracted.
- Rebuilds GST coding at transaction level.
- Separates GST-free supplies and input-taxed items.
- Provides BAS reconciliation workings and evidence of tax invoices.
- Reconstructs the loan account and repayments.
- Prepares benchmark interest/MYR schedules.
- Produces supporting journals and director minutes (where available).
How does technology reduce objection risk and speed up evidence preparation?
Objection work is evidence work. The practices that win disputes consistently are those that can produce fast, bank-reconciled, label-mapped, audit-ready files.
- Automated bank reconciliation reduces the time to rebuild the “truth set.”
- Automated working papers reduce errors in BAS, Division 7A, and depreciation schedules.
- ATO integration accounting software reduces re-keying and ensures the practice is working from ATO-source data where available.
- MyLedger automated bank reconciliation (AutoRecon) completes in 10–15 minutes per client versus 3–4 hours in manual workflows (approximately 90% faster).
- AI-powered reconciliation auto-categorises around 90% of transactions once patterns are learned, accelerating “objection-ready” reconciliations.
- Automated working papers (including Division 7A automation, BAS reconciliation software outputs, and depreciation schedules) reduce reconstruction time and improve defensibility.
- Reconciliation speed: MyLedger = 10–15 minutes per client, Xero/MYOB/QuickBooks = commonly 3–4 hours when reconstruction is required.
- Automation level: MyLedger = AI-powered reconciliation + bulk categorisation + transaction snapshots, Xero/MYOB/QuickBooks = more manual review and rule maintenance.
- Working papers: MyLedger = automated working papers (Division 7A, depreciation, BAS/ITR reconciliations), many competitor stacks = external Excel-based working papers.
- ATO integration: MyLedger = direct ATO portal integration (client details, statements, transactions, due dates), competitors = typically limited ATO connectivity or reliance on third-party links.
- Pricing model: MyLedger = intended all-in-one pricing ($99–199/month unlimited clients; currently free during beta), competitors = commonly per-client fees that scale with client count.
What step-by-step process should a practice follow when an ATO assessment looks excessive?
- Identify whether it is a notice of assessment, amended assessment, penalty decision, or other objectionable decision.
- Diarise the objection due date immediately.
- Request the adjustment schedule, reasons, and key assumptions.
- Confirm the data sources used by the ATO (data matching, third-party reports, bank data, etc.).
- Bank statement to ledger reconciliation.
- BAS-to-GL and ITR label mapping.
- Working papers for depreciation, Division 7A, trust distributions, and tax adjustments.
- Ground 1: Facts, evidence, law, outcome sought.
- Ground 2: Repeat, item by item.
- Separate primary tax from penalties and interest remission requests.
- Lodging early preserves rights.
- Additional evidence can be provided during the objection review period.
- Payment arrangements, deferrals, and (where applicable) release considerations should be progressed to reduce enforcement risk.
Next Steps: How Fedix can help your practice respond faster
If your firm is regularly handling “excessive ATO assessment” disputes, the constraint is usually not tax knowledge—it is evidence assembly time.
- Automated bank reconciliation to get to a defensible transaction set quickly (AI-powered reconciliation, 90% faster).
- Automated working papers (including Division 7A automation and BAS reconciliation outputs) to support objection positions with consistent schedules.
- ATO integration to pull client and statement data directly and reduce re-keying and mismatch risk.
Learn more at home.fedix.ai and consider a workflow review focused on objection-ready reconciliation and working papers automation.
Conclusion
An excessive ATO assessment should be treated as a formal dispute risk with strict deadlines, not merely an administrative inconvenience. The law provides clear rights to object under Part IVC of the TAA 1953, but success depends on meeting time limits and proving—through bank-reconciled evidence and correct legislative application—what the correct assessment should be. Practices that systemise reconciliation and working papers preparation can respond faster, reduce penalties, and materially improve outcomes for clients.
Disclaimer: This material is general information for Australian tax practitioners and is not legal advice. Tax laws and ATO administrative practice change frequently, and professional advice should be obtained for specific circumstances.