Self assesment definition
Discussion Paper
Chapter 1: Background to self assessment and the focus of the review
This Chapter provides the context and essential background for the Review. It discusses the nature of income tax assessment and compares certain aspects of the current self assessment system with the full assessment system it replaced. The Chapter explains why the change was made, how the self assessment system has evolved and gives an overview of how the Tax Office approaches its compliance work.
As further background, Chapter 1 highlights some similarities and differences between our system and that of four other countries with which Australia commonly compares itself: Canada, New Zealand, the United Kingdom and the United States.
The Chapter also introduces themes that are the focus of the Review, including:
how the current arrangements affect taxpayer uncertainty and the consequences of that uncertainty
the need to balance the potentially conflicting objectives of collecting income tax, protecting the rights of taxpayers, and minimising the costs of compliance and administration
the need to appreciate differences in the behaviour and needs of different categories of taxpayers.
1.1 What is tax assessment?
Tax assessments are fundamental to tax collection. Every country that taxes income has laws to impose the tax and a system to assess and collect it. An assessment is the end result of the process of ascertaining a taxpayer’s taxable income and calculating the tax payable on that income.1 A notice of assessment becomes final once the statutory period for reviewing it has expired (see Chapter 3).
In Australia, a key part of the assessment process is the completion and lodgement of an income tax return. This requires taxpayers or their agents (and sometimes third parties) to provide information to the Tax Office about their income, deductions, and any tax offsets to which they are entitled. The task of completing income tax returns requires taxpayers (or their agents) to apply the income tax laws properly to their affairs. The length, scope and nature of income tax law, and the style of the administrative systems to support the law, mean that this can be a difficult task for some.
Depending on the type of assessment system, the roles and responsibilities of taxpayers, agents, third parties and the Tax Office can vary. This is illustrated below in the discussion of the former and current Australian assessment systems and overseas experience.
Chapter 1: Background to self assessment and the focus of the review
This Chapter provides the context and essential background for the Review. It discusses the nature of income tax assessment and compares certain aspects of the current self assessment system with the full assessment system it replaced. The Chapter explains why the change was made, how the self assessment system has evolved and gives an overview of how the Tax Office approaches its compliance work.
As further background, Chapter 1 highlights some similarities and differences between our system and that of four other countries with which Australia commonly compares itself: Canada, New Zealand, the United Kingdom and the United States.
The Chapter also introduces themes that are the focus of the Review, including:
how the current arrangements affect taxpayer uncertainty and the consequences of that uncertainty
the need to balance the potentially conflicting objectives of collecting income tax, protecting the rights of taxpayers, and minimising the costs of compliance and administration
the need to appreciate differences in the behaviour and needs of different categories of taxpayers.
1.1 What is tax assessment?
Tax assessments are fundamental to tax collection. Every country that taxes income has laws to impose the tax and a system to assess and collect it. An assessment is the end result of the process of ascertaining a taxpayer’s taxable income and calculating the tax payable on that income.1 A notice of assessment becomes final once the statutory period for reviewing it has expired (see Chapter 3).
In Australia, a key part of the assessment process is the completion and lodgement of an income tax return. This requires taxpayers or their agents (and sometimes third parties) to provide information to the Tax Office about their income, deductions, and any tax offsets to which they are entitled. The task of completing income tax returns requires taxpayers (or their agents) to apply the income tax laws properly to their affairs. The length, scope and nature of income tax law, and the style of the administrative systems to support the law, mean that this can be a difficult task for some.
Depending on the type of assessment system, the roles and responsibilities of taxpayers, agents, third parties and the Tax Office can vary. This is illustrated below in the discussion of the former and current Australian assessment systems and overseas experience.
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