Review into the underlying causes and the management of objections to Tax Office decisions
A report to the Assistant Treasurer
15 April 2009
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Telephone: (02) 8239 2111
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Level 19, 50 Bridge Street
Sydney NSW 2000
GPO Box 551
Sydney NSW 2001
15 April 2009
The Hon. Chris Bowen
Minister for Competition Policy and Consumer Affairs
CANBERRA ACT 2600
I am pleased to present to you my report on findings and recommendations in respect of the review into the underlying causes and the management of objections to ATO decisions. The report has been prepared under section 10 of the Inspector-General of Taxation Act 2003.
The recommendations are focused on improving the objection system and ATO work practices and processes to promote a more efficient, effective and timely objection process. They seek to encourage greater personal contact between the ATO and taxpayers as a means of resolving disputes, revising ATO performance standards for objections and minimising the impact on taxpayers where there is an ATO delay in finalising objections.
I welcome the work begun by the ATO aimed at reshaping its dispute resolution process while this review was being conducted, and believe it represents an important change in the ATO’s philosophy and approach to dispute resolution. The ATO has also acknowledged the Inspector General’s contribution in developing a model which will inevitably result in improvements for taxpayers, the ATO and tax administration generally.
I have provided the Commissioner of Taxation with the opportunity to respond to the report’s findings and recommendations. The ATO’s response, including the relevant covering letter, is in Appendix 3 to the report. In finalising the report, I have fully considered the ATO’s response.
The review found that the main causes of objections were:
- challenging an ATO decision arising from an audit, default assessment, private binding ruling or where the Commissioner has failed or refused to make a decision;
- taxpayers effectively seeking an amended assessment;
- the ATO’s approach during audit; and
- taxpayers failing to properly respond to ATO requests for further information.
A key finding of the review is that for a significant proportion of objections, there is no genuine dispute with the ATO. The objections process is frequently used by taxpayers to seek an amendment to their self-assessed returns where they are out-of-time to do so under the current amendment provisions. As a result, objections are not a good indicator of the level of disputation in tax administration.
The review recommends that the Government consider improving the objection process, and bringing it in line with self-assessment, by confining objections to cases of genuine dispute between the ATO and taxpayers. Taxpayers’ rights to seek an amendment to correct an error or omission to their tax returns where they are out-of-time to do so should also be preserved. At the moment, this can only be done through the objection process. This could be achieved by updating the current amendment provisions.
The ATO has agreed fully with 8 of the 11 recommendations directed at the ATO, agreed in part or in principle to two other recommendations and disagreed with one other. The ATO has disagreed with my recommendation that it remit the general interest charge, as a general rule, where the ATO takes more than 60-days work time to finalise an objection and the particular taxpayer has acted in good faith. I do not believe that taxpayers should bear significant costs of compounding interest where the ATO delays progress of an objection.
I offer my thanks to the support and contribution of professional bodies, business groups and individuals to this review. The willingness of many to provide their time in preparing submissions and discussing issues with myself and my staff is greatly appreciated. I also thank relevant ATO officers for their cooperation and assistance in this review.
Inspector-General of Taxation
© Commonwealth of Australia 2009
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