I Got an ATO Letter: What Now?
Eight types of ATO correspondence, what each one means, what to do, what not to do, and when you need professional help. Covers letters, overdue BAS, review notifications, audit notices, Director Penalty Notices, garnishees, default assessments, and debt collection.
Never ignore an ATO letter. The right response depends on the type of notice and the deadlines printed on it. letters require a factual comparison of your records against ATO data within the stated timeframe. Overdue BAS notices mean you should lodge immediately, even if you cannot pay. Director Penalty Notices carry a hard 21-day window from the date printed on the notice (not when you open it), after which personal liability is fixed and cannot be reversed by later administration or liquidation. The Taxpayers' Charter gives you the right to professional representation, written reasons for any decision, and a formal objection pathway through to the Administrative Review Tribunal or Federal Court.
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Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact ATO. Read our editorial scope →
Data-matching letter: we noticed a discrepancy
The ATO receives data from over 60 third-party sources including banks, employers, superannuation funds, share registries, property settlement agents, online platforms, and the Taxable Payments Annual Report system. When reported figures do not match, they send a letter specifying the data source, the amount, and the year in question.
What to do
Read which data set is involved (bank interest, contractor income, cryptocurrency, rental). Compare the ATO figures to your own records and lodged return. If you agree there was an under-reporting or over-reporting error, amend your return or confirm their proposed amendment. If you disagree, respond within the stated timeframe with clear explanations and supporting evidence.
What not to do
Do not guess numbers to match their data. Do not ignore the letter. The ATO can amend your assessment unilaterally and charge interest and penalties on the shortfall.
Overdue BAS: lodge first, pay second
An overdue BAS notice means your Business Activity Statement has not been lodged by its due date. The ATO charges Failure to Lodge (FTL) penalties for each 28-day period the BAS remains outstanding, calculated in penalty units ($330 per unit from 7 November 2024, indexed 1 July 2026). The penalty applies even to nil BAS returns.
Review notification: targeted items under examination
A review notification means the ATO is examining specific items in your return, such as work-from-home claims, motor vehicle deductions, or contractor payments. Reviews are narrower than audits and typically resolve in weeks with adequate documentation.
What to do
Read the scope carefully: which years, which taxes, which items. Gather and organise all relevant records before responding. Provide information in writing, clearly and factually. Ask the ATO to confirm the scope in writing if it is unclear.
What not to do
Do not provide extra off-topic information. Do not telephone and ad-lib explanations without preparation. Casual comments can expand the scope of a review into areas not originally flagged.
Formal audit notification
An audit is a comprehensive, formal examination of your financial records and tax affairs under Division 353 of the Tax Administration Act 1953. Audit letters specify the scope, years under review, required records, and any proposed interviews or site visits. Audits take months and involve iterative document requests.
Director Penalty Notice: 21 days, no extensions
A Director Penalty Notice under Division 269 of the Tax Administration Act 1953 makes a company director personally liable for the company's unpaid PAYG withholding, superannuation guarantee charge, or GST. The 21-day window runs from the date printed on the notice, not when you receive or open it. Once the deadline passes, personal liability is locked in and cannot be reversed by putting the company into administration or liquidation.
Non-lockdown versus lockdown DPNs
A non-lockdown DPN allows the director to extinguish personal liability by paying the debt, entering a payment arrangement, appointing an administrator, or commencing a winding-up within 21 days. A lockdown DPN applies where returns were lodged more than three months after their due date. Lockdown DPNs remove the administration and winding-up remedies, leaving only payment or a formal payment arrangement.
Garnishee notices, default assessments, and debt collection
A garnishee notice directs your bank, clients, or other debtors to redirect payments directly to the ATO. Banks and payers are legally required to comply, and diversion can begin immediately. A default assessment is the ATO's estimate of your tax liability when returns remain outstanding; it becomes your legal debt with interest and penalties running from the original due date. Debt collection letters indicate overdue assessed amounts and signal escalating enforcement.
Garnishee response
Contact the ATO immediately to discuss a payment plan or variation. Seek advice from a tax debt or insolvency adviser about options to stop or reduce garnishee deductions. Do not attempt to hide income or open new accounts.
Default assessment response
If you received a warning letter before the default assessment, lodge all overdue returns by the specified date. If a default assessment has already issued, lodge the actual returns as soon as possible so the ATO can replace the estimate. If you disagree with the resulting assessment, lodge a formal objection with evidence within 60 days.
Debt collection response
Verify the debt against your assessments and account statements. If correct but unaffordable, contact the ATO promptly to negotiate a payment arrangement with realistic cash-flow projections. If in genuine hardship, explain circumstances and ask about hardship support or interest and penalty remission. Do not stop lodging returns because you cannot pay.
Your dispute rights under the Taxpayers' Charter
The Taxpayers' Charter establishes enforceable standards throughout any ATO interaction. If you disagree with a decision, the escalation pathway is: discuss with the case officer, request internal or independent review, lodge a formal objection within 60 days of the decision, and (if still dissatisfied) apply to the Administrative Review Tribunal or Federal Court. If you believe the ATO has not followed the Charter or treated you unfairly, lodge a complaint with the ATO and, if necessary, with the Inspector-General of Taxation and Taxation Ombudsman.
Statute references
- Tax Administration Act 1953, Division 269 (Director Penalty Notices)
- Tax Administration Act 1953, Division 353 (access and information-gathering powers)
- Tax Administration Act 1953, Division 284 (administrative penalties)
- Tax Administration Act 1953, Part IVC (objections and appeals)
- Taxpayers' Charter
- Tax Administration Act 1953 (TAA) Schedule 1 Part 4-25 ss 350-1 – 350-15 (self-assessment regime)
- TAA Sch 1 s 284-75 (administrative penalties for false or misleading statements; reasonable care standard; safe harbour for relying on a registered tax agent)
- TAA Sch 1 s 8AAD (general interest charge — compounds daily) and s 280-100 (shortfall interest charge)
- TAA Sch 1 s 14ZW and Part IVC (objections — 60 days for most assessments; 4 years for excess concessional contributions assessments)
Frequently asked questions
Can I phone the ATO about my letter without a tax agent?+
What happens if I ignore an overdue BAS notice?+
Is a letter the same as an audit?+
What is the difference between a lockdown DPN and a non-lockdown DPN?+
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