Material mistakes, material consequences for taxpayers



written by Robert Deutsch CTA *


Much warranted attention has been given to the Four Corners program which aired on the ABC on Monday night last week, and the series of articles recently published in Fairfax media.

That story and the articles undoubtedly demonstrate that, when material mistakes happen, they can and often do have material consequences for taxpayers.

Large taxpayers have access to the Australian Taxation Office's independent review program to ensure risks of poor administration are minimised. The playing field, however, is not level for smaller taxpayers. When one takes into account the powers and resources the ATO has at its disposal to impose tax assessments and pursue taxpayers, smaller taxpayers can struggle to have their voices properly heard in relation to poor administration by the ATO.

As a result, The Tax Institute is calling for serious consideration to be given to the possibility of having ATO decisions being referred to an independent body for further examination where there are allegations of inappropriate behaviour on the part of ATO officers. Though costly to implement and maintain, this may present a more accessible option for smaller taxpayers to challenge aspects of ATO behaviour involving allegations of poor administration.

This should not be a separate division within the ATO – to borrow an old legal maxim “justice should not only be done but should manifestly and undoubtedly be seen to be done." Internalising the process within the ATO will deliver very little in the way of giving the public the reassurance that is now so desperately needed.

In any event, taxpayers should avail themselves of the services of a competent tax professional who could assist them in their adversarial dealings with the ATO.

Before anything happens, however, we need more information as to the size of the problem – at this stage the assertion that the ATO makes a mistake in approximately 5% of cases is not supported by any verifiable evidence. Action should only be taken based on real rather than anecdotal evidence.


* Robert Deutsch is The Tax Institute’s Senior Tax Counsel. This article was first published in the 13 April 2018 issue of the Institute’s member-only TaxVine newsletter.

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