The ATO processes over 12.6 million BAS lodgements per year and sends millions of notices to businesses across Australia. Most are routine reminders. Some are penalties. A few are genuinely serious. The problem is that most business owners can't tell the difference at a glance, and the wrong response to the wrong letter can turn a minor compliance issue into a costly problem.
The ATO envelope arrives and the heart rate goes up. That reaction is normal but usually disproportionate. Understanding what each type of notice means, what action is required, and when you should actually be concerned will save you money, time, and unnecessary stress.
These are the most common pieces of ATO correspondence. They require minimal action and are not cause for concern.
If you haven't lodged your BAS by the due date, the ATO sends a reminder. This is a nudge, not a penalty. It typically arrives within 1 to 2 weeks of the due date and simply asks you to lodge. If you're using a registered BAS agent, you usually have an automatic extension of several weeks beyond the standard due date, so check with your agent before worrying.
What to do: Lodge your BAS. If it's already been lodged by your BAS agent, confirm with them that it went through. No further action needed.
Similar to BAS reminders. The ATO sends these if your company or individual tax return hasn't been lodged by the due date. If you're registered with a tax agent, extended deadlines apply and these reminders may arrive before your actual extended due date.
What to do: Confirm with your tax agent that your return is on track. If you're self-lodging, lodge it.
After you lodge a BAS or tax return, the ATO sends a notice of assessment confirming the amounts lodged and any refund or liability. These are essentially receipts. Check the figures match what you expected and file it.
What to do: Compare the figures to your records. If they match, file it. If they don't, contact your BAS agent or accountant.
The ATO periodically sends statements confirming the super contributions it has received on behalf of your employees. These cross-reference with your STP data.
What to do: Confirm the amounts match your payroll records. Any discrepancies should be investigated promptly.
These letters indicate an issue that needs resolution. They're not emergencies, but ignoring them will make things worse.
You lodged your BAS (good) but didn't pay the amount owed (less good). The ATO sends a payment reminder, typically within 14 to 28 days of the due date. This is a firm request for payment, not yet a penalty.
What to do: Pay the outstanding amount. If you can't pay in full, contact the ATO to set up a payment plan before they escalate. The ATO is generally more accommodating when you reach out proactively. Once they have to chase you, the tone changes.
If you lodge your BAS late without a reasonable excuse, the ATO applies a Failure to Lodge (FTL) penalty. The current rate is $313 for each 28-day period (or part thereof) that the return is outstanding, up to a maximum of 5 periods ($1,565). For medium and large entities, the amounts are multiplied.
The penalty is applied automatically and a notice is issued confirming the amount.
What to do: Pay the penalty or request a remission. The ATO will remit penalties if you have a reasonable excuse (illness, natural disaster, exceptional circumstances) and a good compliance history. Your BAS agent can lodge a remission request on your behalf.
If you have an outstanding tax debt, the ATO charges interest daily at the General Interest Charge rate, currently 10.65 per cent per annum for the January to March 2026 quarter and 10.96 per cent for the April to June 2026 quarter. The rate is updated quarterly, calculated as the 90-day bank bill swap rate plus 7 per cent.
The GIC compounds, meaning you're paying interest on interest. On a $50,000 debt at 10.65 per cent, that's roughly $14.60 per day. Over six months, it adds approximately $2,660 to your bill.
What to do: Pay the underlying debt as quickly as possible to stop the GIC accruing. If you're on a payment plan, GIC still applies to the outstanding balance. There's no way to avoid it other than paying the debt.
The ATO sometimes adjusts your BAS figures based on information it has received from other sources (for example, if your reported PAYG withholding doesn't match the data reported via Single Touch Payroll). An amendment notice shows the original figures, the amended figures, and any resulting change to your liability or refund.
What to do: Review the amendment carefully. If you agree, pay any additional liability. If you disagree, you have 60 days to object in writing. Contact your BAS agent before the 60-day window expires.
Check our BAS due dates to make sure you're always lodging on time.
These letters require immediate action. Delays will cost you significantly more.
The ATO conducts thousands of audits on businesses each year. An audit letter will specify what's being reviewed (income tax, GST, PAYG, employer obligations), the period being examined, and the information you need to provide. It will also include a contact officer's name and phone number.
Common audit triggers include significant year-on-year changes in reported income or deductions, industry benchmarking anomalies (your numbers don't match your industry peers), large or unusual transactions, discrepancies between BAS data and STP data, and tip-offs from third parties.
What to do: Contact your accountant or tax agent immediately. Do not respond to the ATO directly without professional advice. Gather the requested documents. Respond within the timeframe specified (usually 28 days). Be cooperative but don't volunteer information beyond what's been requested. An audit is an information-gathering exercise, not a prosecution.
If your company has unpaid PAYG withholding, super, or GST obligations, the ATO can issue a Director Penalty Notice making you personally liable for the debt. You have 21 calendar days to respond. In 2024-25, the ATO issued over 84,000 DPNs, a 136 per cent increase on the prior year.
What to do: This is urgent. Contact your accountant and a lawyer within 24 hours of receiving the notice. Do not wait.
A garnishee notice means the ATO is directing a third party (your bank, your clients, or anyone who owes you money) to pay funds directly to the ATO. This can be issued against your business accounts or, if a DPN has been enforced, your personal accounts.
By the time a garnishee notice is issued, the ATO has typically exhausted other collection methods. This is the sharp end of enforcement.
What to do: Contact a tax lawyer and your accountant immediately. You may be able to negotiate a payment plan that causes the garnishee to be withdrawn, but time is critical. If the garnishee is on your business trading account, it can freeze your ability to pay wages and suppliers.
A statutory demand is a formal demand for payment under the Corporations Act. If the company doesn't pay or reach a settlement within 21 days, the ATO can use the unpaid demand as grounds to wind up the company. This is a precursor to potential insolvency proceedings.
What to do: Get legal advice immediately. This is not a matter you should handle without a lawyer experienced in insolvency and tax disputes.
The ATO reviews employer records to check compliance with STP reporting, PAYG withholding, and super obligations. This is less formal than an audit but the findings can lead to one. The ATO compares your reported payroll data to what employees have declared on their tax returns.
What to do: Provide the requested information within the timeframe. Ensure your STP data is accurate and reconciled. If you identify any errors, correct them proactively and disclose them. The ATO is more lenient with voluntary disclosures than with errors it discovers itself.
The ATO maintains performance benchmarks by industry (published on the ATO website as "small business benchmarks"). If your reported figures sit outside the expected range for your industry, the ATO may send a letter asking you to review your reporting or provide an explanation.
For example, if the average café in your postcode reports a cost of goods sold of 35 per cent but yours shows 55 per cent, the ATO will flag this as an anomaly. There may be a perfectly good explanation (you run a premium menu with expensive ingredients), but the ATO wants to hear it.
What to do: Review your reported figures against the ATO's published benchmarks for your industry. If your numbers are correct and the variance is explainable, respond with a brief written explanation. If you discover an error, lodge an amendment.
The ATO can request evidence that you're maintaining adequate business records. This is more common for businesses with a history of compliance issues or those in cash-intensive industries.
What to do: Ensure your records are complete and accessible. The ATO requires records to be kept for five years. Digital records are acceptable (and preferred). If your record-keeping has gaps, address them before responding.
Note that from 2026, the ATO has signalled increased compliance activity around Payday Super obligations, which means employer obligation reviews and BAS-related correspondence volumes are likely to increase.
Regardless of the type of notice, follow this process.
Step 1: Read it properly. Not a skim. Read every paragraph. Identify the type of notice, the amount (if any), the due date, and the specific action requested. Most ATO letters have a "What you need to do" section. Start there.
Step 2: Check the due date and put it in your calendar. Every notice has a response or payment deadline. Missing it triggers escalation. Mark it immediately.
Step 3: Log into your ATO online services. Check your business's Integrated Client Account (ICA) for the current balance, any pending actions, and whether additional notices have been issued. Sometimes letters cross in the mail and the situation has already changed by the time you read it.
Step 4: Contact your BAS agent or accountant before responding if the notice is anything beyond a routine reminder. They can check whether the notice is correct, whether you have grounds to dispute it, and what the optimal response is. Many issues that look alarming to a business owner are straightforward for a tax professional.
Step 5: Never ignore it. The ATO's enforcement escalation is predictable: reminder, penalty, interest, DPN, garnishee, statutory demand, wind-up. Each step is more expensive and harder to resolve than the one before. Engaging early, even if you can't pay immediately, almost always results in a better outcome.
Need help understanding an ATO notice for overdue BAS? Book a free 30-minute call.
What triggers an ATO audit for small businesses?
Common triggers include significant year-on-year changes in income or deductions, discrepancies between different data sources (e.g. BAS vs STP), industry benchmarking outliers, large or unusual transactions, and tip-offs. The ATO also runs random audits in targeted industries.
How do I set up a payment plan with the ATO?
You can set up a payment plan online through the ATO Business Portal, by phone, or through your tax agent. The ATO generally requires you to propose a repayment schedule that clears the debt within 12 months for amounts under $100,000. General interest charge still applies to the outstanding balance.
Can the ATO take money from my bank account without telling me?
Yes, via a garnishee notice. The ATO serves the notice on your bank, which is legally required to comply. You'll be notified, but the bank may freeze or withdraw funds before you have an opportunity to respond. This is typically a last resort after other collection methods have been exhausted.
What's the penalty for late BAS lodgement?
$313 for each 28-day period (or part thereof) the return is late, up to a maximum of 5 periods ($1,565) for small entities. The penalty is applied automatically and starts from the day after the due date.
How long does the ATO have to audit me?
Generally 2 years from the date the assessment was issued for individuals and small businesses, and 4 years for more complex matters. There is no time limit if fraud or evasion is involved.
Can I dispute an ATO penalty?
Yes. You can request a penalty remission if you have a reasonable excuse and a good compliance history. For amended assessments, you can lodge a formal objection within 60 days. If the objection is unsuccessful, you can escalate to the Administrative Appeals Tribunal or the Federal Court.
What's the general interest charge rate?
The GIC rate is updated quarterly, calculated as the 90-day bank bill swap rate plus 7 per cent. For the January to March 2026 quarter it is 10.65 per cent per annum, rising to 10.96 per cent for the April to June 2026 quarter. It compounds daily.
Should I respond to an ATO letter myself or use an accountant?
For routine reminders and payment confirmations, you can handle these yourself. For anything involving penalties, amendments, audits, DPNs, or garnishees, always use a registered tax agent or BAS agent. The cost of professional advice is almost always less than the cost of getting it wrong.
What's the difference between a review and an audit?
A review is a less formal process where the ATO checks specific items (for example, verifying a particular deduction claim). An audit is a comprehensive examination of your financial records for a specific period. Reviews are quicker and narrower in scope. Both can result in adjustments and penalties.
Can I call the ATO to discuss a letter?
Yes. The ATO's business line is 13 28 66. If the letter includes a specific contact officer's name and number, call that person directly. Wait times can be long, so calling early in the morning (8am AEST) or using the callback service tends to work better.
ATO, Business Activity Statement Lodgement Data: ato.gov.au
ATO, Penalties and Interest Charges: ato.gov.au
ATO, General Interest Charge Rates (updated quarterly): ato.gov.au
ATO, Small Business Benchmarks: ato.gov.au
ATO, Director Penalty Regime: ato.gov.au
ATO, Annual Report 2024-25: ato.gov.au
Inspector-General of Taxation, Annual Reports: igt.gov.au
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