Tax & ATO News Australia

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Analysing the Systemic Issues Within the ATO

Those of you who have read my rants (blog) know by now my thoughts on the systemic problems within the ATO, but in light of the recent reports by ABC News and Fairfax Media about alleged abusive practices by the ATO, I thought it might be a good time to reiterate.

The alleged abusive practices that are currently in the spot light are not a universal problem, but it is definitely cultural, not an isolated occurrence. There are many officers in the ATO who are reasonable, understanding and work tirelessly to ensure the correct amount of tax is levied and collected. Unfortunately, there are also a significant number of ATO officers who have an institutional bias against tax payers, calling them crooks and cheats, and assuming facts before they are proved.

Regrettably, over many years, I have seen that once a preliminary view is formed, the ATO do not have good systems for reversing that view. The true separation of objection officers from auditors has been successful, in my view, but regrettably debt collection is an entirely separate issue. I have had many matters, including very recent matters, where aggressive debt collection has proceeded (including departure prohibition orders, supreme court proceedings and garnishees) despite there being clear and undisputed evidence that the debt being chased was well in excess of what was genuinely owed.

Tax is a notoriously perplexing area of law. However, few things are more perplexing than the inconsistent administration of the ATO’s disputed debt recovery policies. Strictly speaking, the Commissioner is free to take whatever steps whenever he pleases, regardless of the existence of a dispute – in fact, sections 14ZZM and 14ZZR of the Taxation Administration Act 1953 are explicit that liability to pay assessed tax is not suspended because of pending reviews or appeals. This means, once assessments are issued, the Commissioner is entitled to do what is necessary to recover.

More critically, the power that the ATO has to collect money is virtually unlimited, as I have written about before. This power, coupled with a culture that oscillates between rabidly aggressive (at worst) to uncompromising (at best), means that there is always a real risk that an individual ATO officer will go too far and destroy someone’s life in the meantime. This has happened, and I have personally been involved in many such cases, including cases that are deserving of compensation, so badly has the ATO behaved.

The statement made in the Sydney Morning Herald article, that the ATO targets small businesses more than larger ones because the latter have more money to fight back, certainly has a grain of truth to it. There is no doubt that big business has a greater ability to negotiate favourable payment terms compared with small business. The ATO is open about this – they identify the risk of recovery as being a major factor in aggressively pursuing debt collection. The difficultly is that when combined with the conclusive presumption that an assessment is correct, notwithstanding there being genuine grounds to dispute it, a perceived risk of recovery of an incorrect assessment means that small business taxpayers are frequently pursued for debts that are ultimately proved to be wrong. This does not happen at the big end of town.

When analysing the systemic problems at the ATO, there seems to be two things that can be done to set things right;

  • (1) no debt should be pursued while there is a genuine challenge to the validity of the debt; and
  • (2) if a taxpayer incurs costs in setting the record straight because of ATO errors, 100% of the taxpayer’s costs must be reimbursed.

Taxpayers by and large try to do the right thing. Australians are not tax cheats. Tax laws are horrible complex and even the ATO frequently changes its position on issues. Too easily differences in opinion, or even reliance on old ATO’s views, are considered to be ‘tax avoidance’. By all means the ATO should chase those who deliberately flout tax laws with the full force of the law, but don’t call small business owners tax cheats when they are trying their best to interpret on the fly laws which are neither simple nor well explained. If a mistake occurs, or there is a difference in interpretation, give small business owners the benefit of the doubt and the opportunity to sort through the issues without the threat of aggressive debt collection and financial destruction. 

Posted in: Tax & ATO News Australia at 10 April 18

External Scrutiny Into the ATO

The house of representatives committee on taxation is currently accepting submissions into the external scrutiny of the ATO. This is after recent comments from the Commissioner of Taxation, Chis Jordan that there is too much scrutiny of the ATO. 

Encouragingly, Liberal Senator, Bronwyn Bishop, has resisted this call, saying that given the ATO’s role is to collect money and this has the potential to effect peoples’ lives, parliamentary scrutiny should remain.

More critically, the power that the ATO has to collect money is virtually unlimited, as I have written about before. This power, coupled with a culture that oscillates between rabidly aggressive (at worst) to uncompromising (at best), means that there is always a real risk that an individual ATO officer will go too far and destroy someone’s life in the meantime. This has happened, and I have personally been involved in many such cases, including cases that are deserving of compensation, so badly has the ATO behaved.

The Inspector General of Taxation, Mr Ali Naroozi, does an excellent job of scrutinizing the ATO, with limited resources. Mr Naroozi is a sensible and appropriately skeptical watchdog and needs more scope to review what the ATO does, not less. It would be an absolute disaster if the parliament was convinced that the ATO should be unsupervised.

If parliament agreed with the Commissioner of Taxation in this regard, the result will only be worse for taxpayers, including in particular those many taxpayers who are ultimately showed to have done nothing wrong. There must be consequences if the Commissioner’s actions cause an individual who has not avoided tax at all to lose their business, their house or worse. This has happened, and must not happen again.
 

Posted in: Tax & ATO News Australia at 22 March 16

ATO communication improving? Fingers crossed.

I recently attended a meeting between a number of ATO officers and representatives from the legal profession around Australia.  The meeting was billed as a high level communication exercise, as the ATO is eager to improve relationships with lawyers generally.


Surprisingly, the meeting was very positive.  Representatives of the ATO, right up to the Assistant and Deputy Commissioner level appeared genuinely committed to a new process.  Hopefully this will translate into real changes on the ground.  From past experience, this has not happened.

 

One of the major focuses over the next twelve months for the ATO is debt disputes (that is, where debt matters end up in court for recovery action).  I raised as some length my experiences, some of which I have shared previously, of debt recovery matters where there is a real dispute that the tax debt is wrong and there are appeals on foot.  The ATO (at a high level) were adamant that the ATO did not take debt recovery action when there was a genuine appeal. 

 

I told them they were wrong and gave an example of a taxpayer who sold her house at the height of the GFC because of the pressure she was under from the ATO debt collection department.  She not only had lodged an appeal, but we eventually won with all assessments set aside.  This was cold comfort to her, as she had lost a fortune selling her house in a fire sale in a depressed market.

 

The ATO is keen to hear more examples of these sort of thing happening.  Hopefully they are genuine.  I hope to bombard them with examples.  I have several, but I am hoping that if anyone has a story of debt collection gone horrible wrong, that they could share it with me (anonymously) so that I can start to collate some feedback from the ATO.

 

You can reply below, or email my personal assistant confidentially at abermingham@smh.net.au

Posted in: Tax & ATO News Australia at 24 February 14

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Tax & ATO News Australia

Author: David Hughes

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