The words “review” and “audit” are sometimes used as if they mean the same thing. In ATO compliance work they describe different levels of examination. A risk review usually tests whether a concern requires further action; an audit is a more detailed examination of an issue the ATO has identified.
What is an ATO risk review?
A review is generally an information-gathering stage. The ATO may ask about a transaction, compare data, request selected records or seek an explanation of how a tax position was reached. The purpose is to understand the facts and determine whether a material compliance risk exists.
A review may end without further action, lead to an agreed correction, or identify an issue that warrants a more detailed audit. It should therefore be taken seriously, but receiving a review letter does not mean an audit is inevitable.
What is an ATO audit?
An audit examines an identified risk in greater depth. It may involve more detailed document requests, interviews, analysis of accounting records, technical submissions and contact over a longer period. The ATO should explain the scope, the periods and issues being examined, and the expected process.
An audit can result in no adjustment, an agreed amendment or a formal position leading to amended assessments and possibly penalties and interest. The result depends on the facts, law and evidence; the label “audit” does not predetermine it.
Review and audit compared
| Risk review | Audit |
|---|---|
| Tests whether an apparent risk requires action | Examines an identified issue in detail |
| Often begins with targeted questions or selected records | May require broader records, explanations and interviews |
| Can close with no further action | Can also close without adjustment, but commonly reaches a formal view on the issue examined |
| May progress to an audit if concerns remain | May lead to assessments, penalties or dispute rights |
Does a review automatically become an audit?
No. Progression depends on what the ATO learns. A clear reconciliation may resolve the concern. Incomplete records, unexplained inconsistencies or a wider issue may lead the ATO to expand its enquiries.
This is why the first response matters. It should answer the question accurately without guessing, omitting a material fact or sending irrelevant material that makes the issue harder to understand.
Clarify the scope before responding
Read the opening letter and identify:
- the taxpayer or entities involved;
- the tax types and reporting periods;
- the transaction or risk under examination;
- the information requested and due date;
- the officer and approved response channel; and
- whether the ATO proposes interviews or site contact.
If the request is unclear or exceptionally broad, ask the officer to explain its relevance and discuss a practical production timetable. Keep written records of agreed changes.
Build an evidence file, not just an explanation
Reconcile the return or activity statement to source records. Prepare a chronology and an index of documents. Separate original records from later analysis, and note where a document is unavailable. Check that each statement in the response is supported and consistent with earlier lodgments and correspondence.
For a technical issue, explain both the relevant facts and the tax treatment applied to them. For a data issue, show the reconciliation. For a conduct question, preserve evidence of systems, advice and decisions at the time.
Possible outcomes
A review or audit can conclude with:
- no further action;
- education or recommendations about future compliance;
- a voluntary or agreed correction;
- the ATO issuing its position and amended assessments; or
- penalty and interest decisions alongside additional tax.
If the ATO proposes an adverse view, check the opportunity to respond before finalisation. Once a reviewable decision is made, formal objection rights and time limits may apply.
When professional help may be appropriate
Early assistance can be useful when the amount is material, multiple years or entities are involved, privilege or record-access issues arise, the ATO alleges avoidance or deliberate conduct, or the response may expose another tax issue. It may also help where the request is technically complex or difficult to reconcile.
A practical adviser should test your position as well as the ATO's. If the records show the ATO is correct, the focus may shift to accurate correction, penalties, interest and payment rather than defending an unsustainable position.
Sources
Frequently asked questions
Is an ATO review the same as an audit?
No. A review generally seeks information to determine whether a risk requires further action. An audit is a more detailed examination of an identified risk.
Will an ATO review automatically become an audit?
No. A review can close without further action, result in a correction or progress to an audit depending on the information and risk identified.
Can an ATO audit finish with no adjustment?
Yes. An audit examines the facts and law; it does not guarantee an amended assessment. Possible outcomes include no adjustment, an agreed correction or a formal ATO position.
What should I do first after receiving a review or audit notice?
Verify the notice, record the deadline, clarify the scope and preserve the relevant records. Reconcile the tax position before preparing a numbered, evidence-based response.