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Shortfall penalties

The different types of audits we do, how we select you for an audit and what it will involve.

What are shortfall penalties?

Shortfall penalties apply to most taxes and duties, except child support repayments by liable parents.

Adopting an abusive tax position

An abusive tax position is one that is based on an unacceptable tax position and results in a tax shortfall of more than $20,000 and has tax avoidance as a dominant purpose.

How penalties can be reduced or increased

Shortfall penalties may be reduced or increased under certain circumstances.


Tax evasion may involve: evading assessment of payment of tax, using deducted tax for an unlawful purpose, failing to deduct, unlawfully obtaining a refund or payment of tax or enabling another person to obtain a refund or payment of tax - knowing they are not entitled.

Unacceptable tax position

The legal definition of an unacceptable tax position is one that fails to meet the standard of being, as likely as not, correct.

Not taking reasonable care

Tax laws require you to take reasonable care in meeting your tax obligations. Generally, this means you must take the same care that a reasonable person in the same circumstances would take. The standard doesn't require perfection on your part.

Gross carelessness

In tax matters, "gross carelessness" is behaviour that demonstrates a high degree of carelessness and disregard of the consequences.


We'll usually issue a Notice of proposed adjustment (NOPA) before assessing shortfall penalties, but if we don't you can dispute the assessment (but not the amount) through the disputes resolution procedures.