Compliance
Voluntary disclosure
A voluntary disclosure is when a taxpayer tells the ATO about an error or omission before being asked, which can lead to reduced penalties and a better compliance outcome.
A voluntary disclosure happens when a taxpayer comes forward to correct a mistake without being prompted by the ATO. It might be an unreported sale, credits claimed in error, or incorrect figures on a return. The key feature is timing. The disclosure counts as voluntary if it is made before the ATO has told the taxpayer that an audit or review is going to occur.
The main benefit is reduced penalties. Where an error would normally lead to a shortfall penalty, a timely voluntary disclosure can substantially reduce it, and in some cases remove it altogether if the underlying mistake was made despite reasonable care. If the disclosure is made later, such as after the ATO has begun an audit, the reduction is smaller. The earlier the disclosure, the better the outcome.
For GST, the way to disclose depends on the nature of the error. Many mistakes in a BAS can be corrected in a later BAS, subject to conditions such as time limits and the size of the error. Larger or older errors, or ones that do not meet the conditions, may need to be corrected by formally lodging a revised BAS or by sending a written disclosure to the ATO. The ATO guidance explains which method applies in different situations.
A disclosure should be complete and accurate. It should identify the periods affected, explain what went wrong, and set out the correct amounts, with supporting records. A vague or partial disclosure may not qualify as a full voluntary disclosure and could lead to further questions. Some people make the disclosure through a registered tax agent, who can prepare it correctly and communicate with the ATO.
Voluntary disclosure does not make the tax go away. The correct tax is still payable, and interest, such as the general interest charge, may apply on the shortfall. But it can limit the total cost, protect a taxpayer's compliance record and reduce the stress of an audit. The ATO generally treats those who come forward more favourably than those who are found out.
A common misunderstanding is that disclosing an error is an admission that opens the door to a wider audit. While the ATO can always look at other matters, the risk of being found later is often greater than the risk of disclosing. For serious matters, such as deliberate evasion, a person may wish to take legal advice before approaching the ATO. In those cases, the ATO also has specific programs and guidelines.
This page is general information only. Confirm how to make a disclosure with the ATO or a registered tax professional.
Worked example
A café owner finds that $5,500 of sales, including $500 GST, were left out of the BAS for the last quarter. Before any ATO contact, the owner lodges a revised BAS, pays the extra $500 GST and the interest, and explains the error. Because the disclosure was voluntary and the mistake was honest, the ATO may remit penalties, whereas an uncovered omission found in an audit could attract a penalty.
Practical tips
- Disclose as soon as you find an error, and before the ATO tells you about an audit or review.
- Provide a full explanation with corrected figures and supporting records.
- For serious or deliberate matters, get advice from a tax professional or lawyer before approaching the ATO.