The Inspector-General of Taxation and Taxation Ombudsman (IGTO) Karen Payne, has today released her latest report comprising an initial review of the Australian Tax Office’s (ATO) handling of objections by taxpayers.
The interim report and summary slide deck “Your taxpayer right to object – the ATO’s administration and management of objections” is Phase 1 of the IGTO’s investigation announced in December 2021, looking into the Australian Taxation Office’s Administration and Management of Objections.
“Your Taxpayer right to object is a statutory right,” said Karen Payne. “Our most recent investigation – An investigation into the effectiveness of ATO communications of taxpayer rights to complain, review and appeal – concluded that the ATO is generally effective in communicating taxpayers’ rights to object. However, we also receive strong feedback from taxpayers that the ATO objection process itself could be improved. This is evidenced on our register of suggested areas for investigation – which can be found on our website. Stakeholder consultation and feedback has really been the catalyst for this latest investigation.”
Ms Payne noted that currently, the ATO’s Annual Report, only captures the number of objections resolved. She said there was a need to look at the entire data set in order to better understand this important area, emphasising this also speaks to the rights of taxpayers and the exercise of those rights.
Analysis and evaluation of ATO objections
The extensive Interim report includes analysis and evaluation of the ATO objections universe including data on:
- Who is lodging objections?
- What taxes are they objecting about?
- What outcomes are achieved through the objections process?
- How much Tax is in dispute?
- How long does an objection take to finalise?
Karen Payne also highlighted that receiving, administering and managing objections was a key aspect of the ATO’s administration of the tax system. She said an objection is an important taxpayer right to internal review and it is a ‘gateway’ step to dispute a tax decision through the courts and AAT. It is important that the process has integrity and works fairly and that taxpayers clearly understand how to engage with the process. The IGTO’s independent review therefore supports both transparency and integrity of the tax system.
More than half of objections are self-initiated
“The data the IGTO has captured and reviewed identifies that self-initiated objections represented more than half the objections received by the ATO in FY19 – FY21 (excluding COVID-19 objections). This raises an important question to be investigated further in Phase 2, namely:
- Why are so many objections lodged by taxpayers against their own self assessment?
- Is this simply taxpayers requesting an amendment to their prior year returns because an objection is the only way to amend (when they are out of time) or is something else going on?”
More than half of the objections decisions issued are allowed in full
The IGTO investigation shows that the ATO received 27,780 objections in the financial year ended 30 June 2021. Fifty percent (50%) or more of the objection decisions issued in the period FY19 – FY21 were allowed in full. However, this is not the complete story and different experiences are observed as the data is broken down further, especially by different taxpayer groups.
Different experiences between taxpayer groups
The report also examines the objections experience for different taxpayer groups and notes that a significant number and proportion of objections received by the ATO are determined to be invalid Significantly, in FY19 – FY21 53% – 80% of the objection decisions issued for Superfunds and Not-for-profits (NFPs), were determined to be invalid. This raises another important question:
- What is the ATO doing to assist taxpayers if an objection is determined to be an invalid objection?
COVID impacts – focus on SMEs and PWGs
The introduction of new tax measures during COVID may have created increased compliance and administration costs for both the ATO and taxpayers and registered tax agents. This was especially acute for small business in response to COVID-19 tax related measures. The Interim report notes that a significant number and proportion of small business objections were disallowed in FY21 compared to the previous two years – which were COVID-related.
Karen Payne said: “We would say a most important outcome of this Interim report is that objection outcomes for small businesses in FY21 requires further analysis as do the outcomes for privately-owned and wealthy groups (PWGs).”
Looking ahead – Phase 2 Report
The Interim report is also intended to inform Phase 2 of the IGTO investigation. Stakeholders (and the IGTO) will have the benefit of the information and data presented in the Interim Report. Stakeholders can make further submissions to the IGTO on areas for further IGTO investigation, with the benefit of this information. Stakeholders have previously identified the following issues in their submissions to the IGTO:
- The objection process lacks independence and impartiality, or is perceived to lack independence and impartiality;
- There is a lack of clarity in objection decisions;
- The objection function is insufficiently resourced, leading to objection officers reviewing decisions of more senior staff; or officers being involved in objections where they previously provided advice on the matter;
- Some taxpayers lack sufficient knowledge of the objection process and how to lodge effective objections, leading to unnecessary time and effort to consider objections that are ultimately unable to proceed;
That second phase of investigation aims to provide stakeholders with assurance, findings and recommendations on how to improve this important aspect of taxation administration.
“We want an evidenced based understanding of objections administration so we can recommend where efficiencies might be introduced but also how the rights of taxpayers can be better supported when they object,” said Karen Payne. “Furthermore, we need to know more about how the ATO is resourcing its objection function, for example, the level of the ATO officer making the objection decision versus the level of officer making the compliance/audit decision. Indeed, we would ask how the ATO view of the law is communicated for consistency across the whole objections team.”
The IGTO invites all interested stakeholders to make further submissions to the review investigation. Details are available on the IGTO website – www.igt.gov.au.
For further information – Contact
Marjorie Johnston – Wordmakers
Mobile: 0407 329 430
About the IGTO
The Inspector-General of Taxation and Taxation Ombudsman (IGTO) is an independent, Commonwealth statutory agency, established in 2003. The Taxation Ombudsman function was transferred to the IGTO in 2015. The IGTO provides an important safety net service in the tax system. Independent investigation of taxpayer complaints enhances community confidence in the fairness of the tax system and provides assurance to taxpayers in the fairness of their outcomes. This helps to enhance voluntary compliance. The IGTO also provides independent advice and assurance to Government on the taxation administration laws and systems. Since 2015, the IGTO has performed dual roles, which complement each other:
- The Taxation Ombudsman provides independent assistance and assurance directly to taxpayers and tax professionals and investigates their disputes (unresolved complaints) about the actions and decisions of the Australian Taxation Office (ATO) or the Tax Practitioners Board (TPB), as well as systems relating to tax administration. The Taxation Ombudsman, also investigates and reports on issues arising from taxpayer complaints and dispute investigations which are in the public interest.
- The Inspector-General of Taxation undertakes review investigations of actions, systems and taxation laws (to the extent they deal with tax administration matters) to provide independent advice and recommendations to Government, the ATO and the TPB.
The IGTO contributes to the overall integrity and transparency of the tax system.