ATO Income Tax Return Verification in Australia: What It Is and What to Do

Receiving notice that your tax return is under verification is not the same thing as being accused of anything. It means the ATO is cross-checking some information before finalising your return. Most people who go through this process receive their refund without any change to the amount they were expecting. Some have minor adjustments made. A small number are asked to provide supporting documentation.

Understanding what verification actually is, why it happens, and what to do about it removes most of the anxiety that surrounds it. This guide explains the process in plain language and covers what to do at each stage.

 
What Is Income Tax Return Verification?

Income tax return verification is the ATO's process of reviewing a lodged return against external data sources before finalising it. The ATO collects information from employers through Single Touch Payroll, from banks and financial institutions, from share registries, from government agencies, and from various platforms that report payments made to individuals. When the figures in your return do not align with those external data sources, the ATO may hold the return for a manual check before issuing an assessment.

This is not a new process. The ATO has always cross-checked returns. What has changed in recent years is the scale and speed of the data-matching program. The ATO now processes over one billion transactions annually against lodged returns, which means discrepancies are identified more quickly and more consistently than they were even a few years ago.

Verification is not the same as an audit and it is not a finding of wrongdoing. It is a pre-assessment check, and the outcome for most people who go through it is that their return is finalised without any change.

 
Verification vs Audit: What Is the Difference?

People often conflate verification with audit, and the confusion is understandable because both involve the ATO scrutinising your return. But they are different processes with different implications.
 

	Verification	Audit
When it happens	Before the return is finalised	After the return has been assessed
What it involves	Cross-checking submitted data against ATO systems	Detailed examination of records, receipts, and financial history
Duration	Usually days to weeks	Can run for months or longer
ATO contact	May not contact you at all, or may request specific documents	Formal engagement with detailed requests for evidence
Outcome if no issue found	Return finalised, refund released	No adjustment issued, case closed
Outcome if discrepancy found	Return amended, adjusted assessment issued	Assessment amended, penalties and interest may apply
Does it mean wrongdoing?	No	Not necessarily, but the risk of finding is higher

Verification is a relatively routine process for a minority of returns each year. An audit is a much more intensive investigation and is typically triggered by verification findings, by specific intelligence, or by patterns identified across multiple years of lodgement. Most people who go through verification never progress to audit.
 

What Does Your ATO Processing Status Mean?

When you check the status of your return, you will see one of a small number of status labels. Each means something specific about where your return is in the process.
 

Status label	What it means
In progress: Processing	The ATO has received your return and is working through it. This is the standard state for most returns in the first days after lodgement.
In progress: Information pending	The ATO is waiting for data from a third party such as your employer, bank, or health insurer before it can complete the assessment.
In progress: Under review	The ATO is manually reviewing your return. A person, not just a system, is checking the details. This is where verification occurs.
In progress: Balancing account	The ATO is reconciling your return result with your tax account and checking for any outstanding debts with government agencies.
Issued: [Dollar amount]	Your Notice of Assessment has been issued. The return is finalised. If you are due a refund, the amount shown will be deposited into your nominated bank account.

The status 'Under review' is the one that generates the most anxiety. It means manual attention is being paid to your return. It does not mean you have done anything wrong. It means a human at the ATO is looking at something before the system finalises the assessment.

 
What Triggers a Tax Return Verification?

The ATO does not publicly publish its exact selection criteria, but from the patterns observed across thousands of returns and from what the ATO has disclosed in its own guidance, the most common triggers fall into four broad categories.

 
Income Mismatches with STP and Third-Party Data

The most common trigger is a discrepancy between the income you reported and the income that your employer, bank, or another reporting entity provided to the ATO.

Under Single Touch Payroll, employers report your income and tax withheld to the ATO each time they process payroll. By the time you lodge, the ATO already has your employer's version of your income for the year. If the figure in your return is materially different, the return is flagged for verification.

The same applies to bank interest, share dividends, managed fund distributions, cryptocurrency transactions, and payments from sharing economy platforms. If you received income from any of these sources and did not declare it, the ATO's data-matching program is designed to identify the gap.

One important and often misunderstood scenario: if you lodged before your income statement was marked 'Tax Ready' and used an earlier figure, your return may show income that does not match the final STP data. This is not fraud, but it does require reconciliation and can trigger a review.

 
Deductions That Fall Outside Industry Benchmarks

The ATO publishes industry benchmarks that show typical expense levels for different occupations and business types. If your claimed deductions are significantly higher than the benchmark for your occupation, the return may be selected for verification to confirm that the claims are legitimate.

This does not mean you cannot claim deductions above the benchmark. Legitimate circumstances can produce above-average claims, and the ATO acknowledges this. But the claim needs to be supportable with records. The benchmark is a statistical trigger, not a cap.

Work-from-home deductions, vehicle expense claims, and self-education expenses have all been identified by the ATO in recent years as areas where claims fall outside expected patterns, making them higher-priority verification targets.

 
Administrative and Lodgement Triggers

Several procedural situations reliably trigger a manual review regardless of the content of the return:
 

• Lodging multiple returns for the same year. If you lodge a return and then lodge another one before the first is finalised, the duplication must be resolved manually.
• Making an amendment before your original return has been assessed. The ATO needs to process the original before it can assess the amendment, and the timing creates a manual review situation.
• Lodging returns for multiple prior years in a single session. Several years of lodgements at once requires more cross-checking than a single year return.
• Changing bank account details. Recent changes to the account into which your refund will be paid can trigger a verification to confirm the details are correct before releasing funds.
• Returning a previously incorrect lodgement. If a prior return was amended after assessment, the current year return may receive closer attention as a follow-on measure.

 
Prior Debts and Government Agency Checks

If the ATO is aware of an outstanding debt, whether from prior tax returns, Centrelink overpayments, child support obligations, or HECS/HELP repayments, the 'balancing account' stage of your return involves cross-checking with the relevant agencies before any refund is released. If a debt is identified, the refund may be offset against it rather than paid to you.

This is not a verification of your return in the usual sense but it does delay the finalisation and can change the amount you receive. H&R Block agents who are aware of a client's outstanding obligations can often flag these before lodgement so the outcome is not a surprise.

 
What Happens to Your Refund During Verification?

Your refund is held during verification. The ATO will not release money to your account while the return is in 'Under review' status. This is the most practically significant consequence of verification for most people.

How long the hold lasts depends on the nature of the review. A simple data-matching check that resolves within the ATO's systems can be completed in a few days without any contact with you. A review that requires the ATO to request documents from you takes longer by definition, as it depends on how quickly you respond and how long the ATO takes to assess the documentation you provide.

The ATO's published guidance suggests a timeframe of up to 30 days for a manual review. In practice, straightforward cases are usually resolved within two to three weeks. More complex reviews can take longer.

Once verification is complete, your return is assessed and the refund is released. In most cases the refund amount is not changed. If a change is made, you receive a revised Notice of Assessment showing the adjusted amount and the reasons for the adjustment.

Financial hardship provision: If the delay in your refund is causing genuine financial hardship, a registered tax agent can contact the ATO and request priority processing on your behalf. The ATO has provisions for this and the request is considered seriously. Acting early through a professional is more effective than calling the ATO directly.

 
What the ATO May Ask You to Provide

The ATO's request for documentation, if it makes one, will be specific to the part of your return under review. A general principle applies: the burden is on the taxpayer to substantiate claims, not on the ATO to disprove them.

For work-related expense claims, the ATO typically wants:
 

• Receipts or invoices showing the nature of the expense, the supplier, the date, and the amount
• A logbook if the claim involves vehicle expenses under the logbook method
• A written hours record if the claim involves home office expenses under the fixed rate method
• Diary entries or records that demonstrate the work-related purpose of claimed expenses

 
For income verification, the ATO may contact your employer or financial institution directly rather than asking you to provide documents. You may receive a notification that this contact is happening.

The ATO can request records that support your claims for up to five years. In cases of suspected fraud, there is no time limit. Keeping records for five years after the relevant return is lodged is the minimum requirement, and for returns that involve capital assets such as property or shares, records may need to be kept for as long as the asset is held plus five years from the date of sale.

If you cannot find a specific receipt, bank statements showing the transaction can often serve as alternative evidence. If an expense was genuinely incurred but cannot be substantiated, an H&R Block agent can assist with preparing a reasonable estimate and explanation for the ATO, which sometimes allows the claim to be partially accepted.

Your return is under review. Do not handle this alone.

When the ATO reviews a return, having a registered tax agent in your corner changes the dynamic entirely. H&R Block agents communicate with the ATO on your behalf, prepare and submit supporting documentation, and manage the response process so you are not dealing with ATO correspondence directly. If you are under review and you are not currently with a tax agent, contact H&R Block today.

 
What Should You Do If Your Return Is Under Review?

The most important single piece of advice is: respond promptly to anything the ATO sends you. Ignoring or delaying responses to ATO requests does not pause the clock on interest or penalties if a liability is ultimately found. It extends the period of uncertainty and can signal non-cooperation.

Beyond that, the steps are straightforward.
 

1. Do not lodge another return or amendment while the current return is under review. Adding more lodgements to a return that is already being manually reviewed complicates and delays the process further.
2. Gather your records for the period under review. Even before the ATO asks for anything specifically, locate your receipts, bank statements, logbook if relevant, and any other documentation supporting your claims. Having these ready significantly reduces the response time if a request arrives.
3. Contact your tax agent if you have one. A registered tax agent receives ATO correspondence on your behalf and can respond directly without you needing to engage with the ATO at all. If you lodged without an agent, this is an appropriate moment to engage one.
4. Do not contact the ATO to hurry the review unless you have a genuine financial hardship situation. Calling the ATO to ask about the status of a return under review does not accelerate the process and uses the agent channel more effectively.
5. Wait for the Notice of Assessment. When the review is complete, the ATO will issue an assessment. At that point you will know the outcome and can decide whether to accept it or object.

 
What If the ATO Finds a Discrepancy?

 
If the Discrepancy Is in the ATO's Favour

If the ATO's review finds that your return overstated deductions, understated income, or made another error that reduces your refund or creates a liability, the return will be amended. You will receive a revised Notice of Assessment showing the adjusted figures and the reason for the change.

If tax is now owed, the General Interest Charge applies from the original due date of the return. Penalties may also apply depending on the nature of the discrepancy. The ATO distinguishes between honest mistakes, which attract lower or no penalties, and reckless or deliberate errors, which carry heavier consequences.

For genuine errors where the correct amount was simply not claimed or declared, a proactive approach, either amending the return before the ATO identifies the issue or cooperating fully with the review process, typically produces a better penalty outcome than being unresponsive.

 
If the Discrepancy Is in Your Favour

Occasionally, verification reveals that the ATO's data suggests you should have received a larger refund than you claimed. This might happen if an income offset you were entitled to was not applied, or if a pre-fill error understated your tax withheld. The ATO will issue a revised assessment in your favour and release the additional amount.

 
Can You Fix It Yourself?

If you realise before the ATO contacts you that your return contains an error, you can lodge an amendment. However, do not lodge an amendment while your original return is still under review. Wait for the original to be finalised, then lodge the amendment.

If you are contacted by the ATO during verification and you realise the query relates to an error you made, tell the ATO through your response, or through your agent's response, what actually happened and provide the correct information. Voluntary disclosure of errors during a review is treated more favourably than errors that the ATO must identify through further investigation.

 
How to Reduce Your Risk of Being Selected for Verification

Verification is never guaranteed to be avoided. Some returns are selected at random as part of the ATO's compliance program, and there is nothing you can do about that. But the triggers that are within your control are worth addressing.
 

• Lodge after your income statement is marked Tax Ready. Lodging in the first week of July with preliminary figures is one of the most common avoidable verification triggers.
• Ensure your bank account details are correct and have not recently changed. If you changed your details, allow a period before expecting a smooth refund release.
• Keep records for every claim. The $300 threshold above which receipts are technically required applies to any single expense category, but the ATO can still ask you to justify lower amounts if the total claim looks unusual.
• Claim deductions that are proportionate to your actual work use. Claiming 95% business use on a vehicle that is also your family's primary transport is a statistical outlier that tends to attract attention.
• Do not lodge multiple returns or amendments while a previous lodgement is still being processed.
• Use a registered tax agent. Returns prepared by registered agents are statistically less likely to contain the kinds of errors and inconsistencies that trigger verification, because a professional who understands the ATO's expectations is preparing them.

 
The last point is the most practically significant. H&R Block agents prepare returns with current knowledge of the ATO's data-matching priorities, industry benchmarks, and documentation requirements. A correctly prepared return with appropriate claim levels and supporting documentation is the single most effective strategy for smooth processing.