Tax & ATO News Australia

A lesson on evidence for the taxpayer

In a fight against the ATO, you are guilty until you prove yourself innocent. You not only need to demonstrate that the assessment made by the ATO is wrong, but also what the correct assessment should be. A fight against the ATO can be lost, even if the ATO is wrong. Getting the right evidence is critical. A recent AAT decision was found in favour of the ATO because:
It is undoubtedly the case that the [ATO’s] assessments are not correct but the [taxpayer] has not shown the taxable income on which tax ought to have been levied.  It follows that he has not shown that the assessments are excessive.
This case was inherently complex with links and ties to an offshore bank in Liechtenstein, In October 2006, an employee of the bank handed over three compact discs to the ATO with details of 20 Australians holding $110 million in the bank. Among one of those Australians was 70 year old retiree, Dr Harold Murray. In June 2008, the ATO used this information to amend assessments of Dr Murray’s income right back from 1999 to 2007 which led to an alarming tax bill of $36 million for Dr Murray.
Dr Murray disputed the assessments on a number of grounds. However, he ultimately lost because he not only failed to produce any documents in support of his contentions, but also failed to appear in the AAT to give evidence. He said that he was concerned about receiving a Departure Prohibition Order like Paul Hogan if he returned to Australia to give evidence.
This case reinforces the importance of presenting the evidence correctly in a fight against the ATO. I have successfully run a number of AAT cases against the ATO and can help you gather and prepare the evidence to put you in good stead in your fight against the ATO.

Posted in: Tax & ATO News Australia at 12 September 12

Paul Hogan and John Cornell settle with the ATO!

After eight long arduous years the battle between Paul Hogan, John Cornell and the ATO has been settled, behind closed doors.  Details of the settlement will almost certainly never be made known to the public.  This is a pity because its important for the public to appreciate the emotional, financial and reputational stress that fighting the ATO can cause.

As Mr Hogan’s solicitor recently pointed out, in the eyes of the public, Mr Hogan is now forever labeled a “tax cheat” as a recent article on the “12 Sexiest Celebrity Tax Evaders” shows.  This is disgraceful, particularly as Mr Hogan has always maintained his innocence and no adverse findings have ever been proven against him.
Susannah Moran ran the story in The Australian yesterday (the full article is behind The Australian’s pay wall).

Posted in: Tax & ATO News Australia at 02 May 12

Inspector General of Taxation criticises ATO competence

The Federal Assistant Treasurer has released a long awaited report from Ali Noroozi, Inspector General of Taxation, into the conduct of audit officers in the ATO. Unsurprisingly, the report is highly critical of the ATO.

Susannah Moran, of The Australian, reports:

Assistant Treasurer David Bradbury yesterday released a December report by Inspector General of Taxation Ali Noroozi into issues surrounding the audits of small and medium enterprises (SME) and high wealth individuals (HWI).

"This review was carried out in response to concerns that larger SMEs and HWIs may be unfairly treated and subject to unnecessary compliance costs, delays and inappropriate conduct as well as lack of commercial awareness and technical knowledge of ATO staff," Mr Noroozi said. (The full story is behind The Australian’s paywall)

It is curious that an unfavourable report given to the Federal Government in December is only released by the Assistant Treasurer the day before Anzac Day.  “Putting out the trash”, I think that is called if I remember my Politics 101 lessons correctly (ok, West Wing).
The report includes the following conclusion:

“...the level of disputation, weight of objections upheld and the proportion of liability reversed on review indicate a high incidence of unsustainable initial ATO compliance positions," the report says. "In a number of situations this is imposing very significant compliance costs on taxpayers for tax positions that on a more considered view should not have been raised.” (Read the full report on the Inspector General of Taxation website here)

This is not news to the large number of Australian taxpayers who are at the receiving end of “unsustainable initial ATO compliance positions”. The worst thing is that when the ATO gets it wrong, it’s you as the taxpayer, who has to prove your case.  You are guilty until you prove yourself innocent.
As much as I respect Mr Noroozi, the phrase “very significant compliance costs” does not begin to cover the financial, emotional and time pressures of having to prove yourself against the combined resources of 22,000 ATO employees.
And that does not even begin to touch on the reputational damage people suffer when going through an ATO dispute.
One client said to me recently that he is desperate for people to hear his story (because he has been treated appallingly at the hands of the ATO), but he does not want people to think he is a tax cheat. He has paid his taxes for decades, always followed the advice of his accountant, and never done the slightest thing wrong, but because he does not meet the ATO benchmarks for his industry, he has been hit with a huge default assessment, which he has to disprove. In the meantime, the ATO can, and has, issued garnishee notices against his bank accounts and forced him to sell up property.
If you, or your clients, are faced with an audit, even if you think there should be nothing to worry about, it pays to get someone like us at SMH Tax Lawyers to have a second look at the matter early - before you are faced with a massive, incorrect tax bill that you then have to fight.

Posted in: Tax & ATO News Australia at 26 April 12

This report doesn't come as a surprise to us either. The ATO and their benchmark analysis is totally inadequate and it is a situation of guilty until proven innocent. The main issue in these matters is their lack of understanding of how business operates. They just have no experience at all when it comes to everyday business transactions. Look forward to more comments on this topic in the future
Comment by Michelle Gargar lodged 26 April 12

I fully understand the plight of Ms Michelle Gargar. I have been in a two year battle with the ATO after an audit. I have number of points that I would like to raise. I informed the ATO at the time of the audit that I was deploying to Middle East on operations for three months and and it would be difficult to communicate with me. The auditor continued to Email me and question me through out the first two months of my deployment. I regularly informed her I did not have my documents and all information was to the best of my knowledge. With this she proceeded to made the her assessment and enforced a fine of $7700. Four months later she admitted that she had made an error but I had to go through the lengthy process of submitting an Objection. Secondly as a member of the Defence Force, I am exempt from Medicare as my wife pays the 1.5% out of her lower pay for the remainder of the family. It was during the objection process that I informed another auditor and her supervisor of this case but they still added it to my ever increasing bill. My overall assessment of the situation is that the ATO auditors make a quick assessment impose the penalty and are forever passing on the buck.
Comment by Anonymous lodged 27 May 12

ATO staff member backs claims of undue heavy handling by ATO

Not only are taxpayers outraged by the abuse of powers by ATO officers, now its own staff members are speaking out.  See one staff members story here.  She is even suing the ATO for bullying.  What chance does the ordinary taxpayer have when the ATO is prepared to treat one of its own staff members this way?

Call me if you feel you have also been mistreated by officers of the ATO and lets see if there is something we can do together to stop this injustice.

Posted in: Tax & ATO News Australia at 19 April 12

David You need to check out Serene's open letter to the Taxation Commissioner

Additional posts
Comment by Steve lodged 15 May 12

ATO abusing its power?

Following on from previous stories about Mr Ron Pattenden’s ordeal at the hands of ATO officers, now a group of ATO staff have also spoken out about the abuse of power by the ATO.  See their story and more about Mr Pattenden’s ordeal here as screened on ABC’s 7.30 Report on Monday 9 April 2012.

Posted in: Tax & ATO News Australia at 12 April 12

Abolition of transfer duty on business assets delayed - again!

The Queensland State Government has yet again deferred the abolition of duty on core (non-real estate) business assets. 

On 13 January 2012, Deputy Premier and Treasurer Andrew Fraser announced the further deferral as part of the Mid-Year Fiscal and Economic Review for 2011-2012. 
Each state government was required to abolish certain state taxes including duties as part of the trade-off for the introduction of the GST.  The state governments committed to abolishing most duties as part of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations
The abolition of duty in Queensland on core business assets was first announced as part of the 2006-2007 budget measures and was originally scheduled to be abolished as to 50% on 1 July 2010 and the remaining 50% on 1 July 2011 – no abolition of the duty occurred on either date and the abolition was later delayed to 1 July 2012 and then further delayed to 1 July 2013.  This time, the Government has not committed to a date and has simply stated in the recently published Mid Year Review that it will be “deferred until the Budget can accommodate the abolition”. 
The significant deterioration of key performing revenue sources for the Government such as transfer duty and GST were blamed as the reasons for the further delay.  According to the Treasurer the Government’s revenue forecasts for transfer duty are down by $1.148 billion and GST down by $544 million. 
Duty on business assets other than land will no longer apply in NSW from 1 July 2012.

Posted in: Tax & ATO News Australia at 02 February 12

Ron Pattenden - the full story

As promised, here is a full copy of the article published by The Australian on Saturday 14 January 2012.

Posted in: Tax & ATO News Australia at 01 February 12

A taxpayer's fight to clear his name with the ATO

After many years of fighting the Australian Taxation Office’s allegations of taxes owing and being served with more than one Deportation Prohibition Order by the ATO, Ron Pattenden’s ordeal at the hands of the ATO is still not over.  Despite the fact that we continue to defeat the ATO on Mr Pattenden’s behalf, the ATO seems determined to fight to the bitter end.  Most recently, they have gone all the way back to 2001.  Mr Pattenden will, of course, fight the ATO and clear his name. 

His story was published in The Australian last Saturday.  You can read the beginning of his story here  The full story is available to subscribers of The Australian, however, I will be posting a copy of it here in the next week or so.

Posted in: Tax & ATO News Australia at 17 January 12

ATO loses 3 major cases in 2011

Despite propaganda from the Acting Commissioner of Taxation to the contrary, the Australian Taxation Office copped a battering in a number of cases towards the end of 2011.

The ATO lost in three major tax cases last year – Commissioner of Taxation v Clark[2011] HCATrans 236and The Commissioner of Taxation of the Commonwealth of Australia v Multiflex Pty Ltd[2011] HCATrans 344,which both went to the High Court - and Crown Insurance Services Limited and Commissioner of Taxation[2011] AATA 847, which SMH Tax Lawyers ran on behalf of an offshore insurance company.

All three cases involved the ATO following very narrow, technical arguments and subsequently losing.

In Clark, the ATO tried to overturn a 1990 High Court decision in relation to whether changes to a trust create a new trust estate.  In Crown Insurance, the ATO went even further and tried to overturn a 1932 High Court decision.

The ATO’s strange interpretation of its model litigant obligations was obvious in the Multiflex case.  Multiflex was one of a number of large businesses where the ATO was refusing to refund the Goods and Services Tax owing to the taxpayer, notwithstanding, that this was money the ATO was required by legislation to refund – no different to an income tax refund.

While the ATO was deciding whether to challenge the GST refund, it felt that the money was better in the government’s coffers, rather than with the taxpayers.  At each level of appeal, the Courts held that the ATO was wrong and had to repay the money, but it was not until a hearing before the High Court of Australia, that the ATO finally conceded it had to pay the money back.  The financial distress which was caused to the taxpayers in the meantime was, no doubt, considerable.

Unfortunately, the ATO has a history of using litigation in tax disputes to try and force an outcome.  Although the ATO has unlimited resources and the onus of proof on its side, occasionally taxpayers are prepared to fight for their rights through the courts.

An article in this Saturday’s edition of The Australian newspaper will feature one such taxpayer, who is a client of ours. Check it out if you get a chance.

Posted in: Tax & ATO News Australia at 13 January 12

Hi Ben, The 1938 High Court decision (not 1932, sorry) referred to is Tariff Reinsurance Limited v Commissioner of Taxes (Vic) (1938) 59 CLR 194. Feel free to email me directly to discuss further. Where are you studying? Kind regards David Hughes
Comment by David Hughes lodged 05 March 12

I'm doing a tax law case analysis on the Crown case for university and was wondering which case you were referring to when you say: "In Crown Insurance, the ATO went even further and tried to overturn a 1932 High Court decision." I look forward to hearing from you shortly and would appreciate any wisdom you could impart regarding this case. Thank you very much for your time. Regards, Ben Singleton
Comment by Ben Singleton lodged 26 April 12

Merry Christmas from the ATO

Lawyers would have recently received the Queensland Law Society's Newsflash outlining the ATO’s current data matching project in relation to the profession.

A similar exercise proved very successful for the ATO when undertaken through the NSW Law Society in 2003/4, however, the outcome was not so favourable for some lawyers and barristers. This followed a particularly high profile case where a well known Sydney silk declared himself bankrupt after 45 years of not lodging tax returns.

If you would like to know more about how the ATO’s data matching project might affect you, David Hughes from SMH Lawyers is one of only four Accredited Specialists in Taxation Law in Queensland.

If you happen to be unfortunate enough to receive a call from the ATO or you would like to know whether or not you should worry, give David a call on 07 5552 6666.

Posted in: Tax & ATO News Australia at 19 December 11


Tax & ATO News Australia

Author: David Hughes

Last 12 months