Tax & ATO News Australia

Bullying by the ATO

And so the battle continues ...  ordinary Australians having to self fund their fight with the ATO losing almost everything they have worked hard for on the way, not to mention the breakdown of their relationships and the toll on their health.  Last night's 7.30 Report covered the story of more victims of bullying by the ATO -

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

Inspector-General of Taxation releases report into ATO's use of benchmarking to target the cash economy

On 4 October 2012, the Assistant Treasurer, David Bradbury, released the Inspector-General of Taxation's report on its review into the ATO’s use of benchmarking to target the cash economy.

This report was made following consultation with stakeholders. Whilst the stakeholders were generally supportive of the ATO using benchmarks to exclude large numbers of likely compliant taxpayers from compliance activities, they were concerned that that the ATO’s benchmark-based compliance activities captured many compliant taxpayers resulting in unnecessary stress, extra compliance costs and time away from their businesses. The report found that the ATO had made adjustments in only 24% of the 7670 benchmark audit cases, meaning that 5830 taxpayers had been wrongly accused.

Overall the report made 11 recommendations to improve the use of benchmarks by the ATO. Although the ATO agreed with nine recommendations, I am concerned that the ATO only partially agreed with two. One of these recommendations was that the ATO agree to publish more information about how it develops and uses its benchmarks. However, the ATO has refused to publish geographical comparisons of benchmarks. The other recommendation was better record-keeping and the accurate reporting of income so that the overall costs for small business are minimised.

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

Qantas loses GST battle with ATO

On 2 October 2012, a landmark decision was handed down by the High Court of Australia in favour of the Commissioner of the Taxation.


The majority held that that Qantas must pay GST to the Commissioner of Taxation on tickets sold for flights that were never taken, and where customers never sought a refund.
Qantas argued that it was entitled to keep $34 million in GST on non-refundable and refundable but unclaimed tickets as it had not made a supply.
On the other hand, the Commissioner of Taxation argued that Qantas had made a supply by keeping its fares for its customers.
However, after examining the terms and conditions of Qantas’ contracts with its passengers, the majority held that Qantas does not provide an unconditional promise to carry passengers or their baggage on a particular flight. 
Instead the majority held that, “[Qantas] supplied something less than that. This was at least a promise to use the best endeavours to carry the passenger and baggage having regard to the circumstances of the business operations on the airline. This was a ‘taxable supply’ for which the consideration, being the fare was received.”
This case makes it clear that taxable supply is made incurring GST liability even if a passenger does not show up for their flight. This decision could therefore implicate other businesses that charge GST on non-refundable tickets, such as tour companies, ticket operators and other transport operators.

Posted in: Tax & ATO News Australia at 05 October 12

Federal Government amends Part IVA restrospectively

In the last two years, the ATO has lost nine out of the fifteen Part IVA cases. In a number of cases including Futuris, RCI and AXA, the Court held that Part IVA did not apply because the taxpayer had demonstrated that if the scheme has not been entered into or carried out, it was a reasonable assumption that the taxpayer would not have proceeded with the transaction and therefore did not obtain a “tax benefit”.


In response, the ATO has pressured the Federal Government to amend Part IVA. On 1 March 2012, the Federal Government announced that Part IVA will be amended retrospective from 1 March 2012. In making the announcement, Senator Arbib stated that, “The Government amendments will confirm that Part IVA always intended to apply to commercial arrangements which have been implemented in a particular way to avoid tax. This also includes steps within broader commercial arrangements.”
Given that the details of the amendments are yet to be determined, it seems outrageous that the amendments will be enacted retrospectively. Taxpayers will just have to wait until the Federal Government introduces the amendments in Parliament. The Federal Government has indicated that it intends to introduce the amendments in Parliament in Spring 2012, yet it will be interesting to see whether the Federal Government meets this deadline. 

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

Tom Tate shuns carbon tax

See Channel 9’s news story


Should Tom Tate be budgeting for the Federal Government’s carbon tax?  I believe he should certainly be obtaining some specialist legal advice and quickly!
For anyone who might like to make their own decision or just get their head around the whole carbon tax issue, here are some handy links to carbon tax related pages:-

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

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


Tax & ATO News Australia

Author: David Hughes

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