The Tax Office has launched an investigation into the latest failure of its online systems, conceding public trust in the agency will suffer from repeat meltdowns at tax time.
Outages hit the agency's IT system on Wednesday afternoon, forcing tax return systems offline at short notice.
Online customer services were down until after 8pm, although the main ATO webpage remained operational.
Taxpayers trying to lodge their tax returns were met with a webpage saying the service was temporarily unavailable, explained by officials as having been caused by applications running incorrectly and requiring an immediate reboot.
On Thursday, the ATO's acting chief operations officer, Frances Cawthra, said the failures could have been worse if officials hadn't acted to take systems offline.
She could not rule out further failures and said there had been no loss of data. The agency has stressed the problems were not caused by a cyber hack or attempted denial of service attack.
"The service would have been degraded to the point where the experience would have been very difficult, [with] very long wait times, inability to refresh screens," Ms Cawthra told the ABC.
"It's very unfortunate and we of course understand that the community will be very upset and angry about the fact that the systems had to be brought down again."
The outage came hours after Tax Commissioner Chris Jordan appeared at Canberra's National Press Club and said the annual tax season was under way without any system failures.
Mr Jordan said about 210,000 tax returns from individuals and agents had already been lodged online.
Ms Cawthra said an investigation was under way but the outage would damage confidence in the ATO.
"That will go to our reputation, we understand that," she said.
"We'll do what we call a post-incident review, which is to understand where the root cause of this particular issue was."
"They're very complex systems and... in today's world that's just not a guarantee we can give but we do have every confidence that we are well on our way to a very good tax time."
Industry group the Institute of Public Accountants called for tax agents to receive compensation from the ATO.
Labor's assistant treasury spokesman Andrew Leigh has called for the Inspector General of Taxation to review outages.
Dr Leigh said an independent review of the ATO's online services was needed after the string of failures and thousands of job cuts under the Coalition.
"The government does not appear to be interested in reassuring the public that the intermittent outages will be resolved and reviewed," he said.
In February the ATO could not guarantee it would begin tax time 2017 on July 1 as it scrambled desperately to save this year's tax return program from the fall-out of its disastrous pre-Christmas online meltdown.
It has already abandoned much of its IT program for this year after a major systems collapses in mid-December and February.
A report on the outages released last month blamed multinational Hewlett Packard and stressed fibre optic cables for the chaos, saying technicians had failed to effectively respond to the escalating meltdown for nearly four hours.
The ATO is dealing with the $165 million Plutus tax scandal, which Mr Jordan said had "tarnished" the agency's reputation, describing the wealth allegedly accumulated by members of the syndicate as "staggering".