Data recently released by the Australian Taxation Office (ATO) covering taxation and superannuation related litigation for the period 1 July 2007 to 29 February 2012 contains some matters of significant interest. Of particular note are the following statistics for the Financial Year ended 30 June 2011:
- 24,000 taxpayers lodged objections (an ATO internal review mechanism for taxpayers who are dissatisfied with ATO decisions);
- There are 270 tax and superannuation matters presently before Courts and/or Tribunals in Australia;
- Decisions made by Courts and/or Tribunals were predominantly in the ATO’s favour – just 35% of decisions favoured the taxpayer;
- The majority of objections lodged related to income tax assessments (72%);
- Most taxpayers who objections lodged in relation to decisions concerning income tax assessments had previously been the target of an ATO audit or review (also 72%);
- The number of Court cases involving Goods and Services Tax (GST), Fringe Benefits Tax (FBT), superannuation and excise were a relatively small number of the total cases (18% for GST, 12% for FBT, 1% for superannuation and 1% for excise);
- For the Financial Year ended 30 June 2011, almost all tax and superannuation objections did not proceed beyond the objection stage (97% finalised at the objection stage, a further 2% were resolved prior to the hearing of any review or appeal by a Court or Tribunal;
- Taxpayers generally preferred to use Tribunals for the review of taxation decisions rather than Courts (80% of reviews were handled by Tribunals);
- It was common for appeals to Courts and Tribunals to be finalised before hearing – 61% of matters were resolved in this way;
- 12 test cases decisions were made – of these, 8 clarified the law; the other 4 resulted in the Government announcing changes to the taxation laws;
- The spending by the ATO on legal costs is significant at roughly $81m per year on legal costs including litigation and other legal services.
Responsibilities imposed upon the Commissioner by legislation as well as applicable policies limit the circumstances in which the ATO can settle disputes before Courts and Tribunals. This is particularly the case with respect to commercial settlements, i.e. those involving an agreement by the ATO to forego an entitlement to some of a tax debt. For example, Practice Statement Law Administration PS LA 2013/3 regulates Alternative Dispute Resolution in ATO disputes, and Practice Statement Law Administration PS LA 2007/5, which outlines the key elements of the settlement process.
In the Financial Year ended 30 June 2011, the ATO settled just over 300 disputes under the ATO’s Code of Settlement Practice. These settlements involved a reduction of $747m in taxation liabilities.
The ATO took particular note of the fact that taxpayer appeals to Courts that settled before hearing peaked at 86% in 2009-10. This was caused by the high level of mass marketed scheme-related settlements. Further, the ATO acknowledged that it conceded and finalised pre-hearing 51 cases in 2007-08, or 37% of the total.
Since that time, neither the ATO or taxpayers have conceded very many cases, with taxpayers conceding more often than the ATO.
The litigation report provides that the most common reason for the ATO to concede a case was where the taxpayer provided fresh information.
Irish Bentley Lawyers have a significant level of experience in taxation litigation across various Courts and Tribunals. We have also been involved in a variety of taxation objections, reviews and appeals. Furthermore, we can assist clients with private ruling applications, audits and reviews of their taxation affairs. We have also assisted a range of clients who are struggling with taxation debts to come to arrangements whereby insolvency solutions can be avoided, such as applications to pay taxation debts by instalments and applications for the remission of general interest charge and shortfall interest charge. We prefer to provide most of our services on a fixed price basis (rather than a time basis) where possible.
Please note that the above does not constitute legal advice and Irish Bentley Lawyers make no representations or warranties as to the accuracy of any of the information contained herein. If you have a taxation issue, then please do not hesitate to contact the team at Irish Bentley Lawyers – there is no substitute for proper legal advice based on your individual and unique circumstances.