Information released by the Australian Taxation Office shows the majority of taxpayer disputes are resolved before reaching tribunal or court hearings when taxpayers and the ATO work closely together.

 

In releasing the latest edition of Your case matters, which aims to provide the full picture of ATO litigation including trends over the past five years, Tax Commissioner Michael D'Ascenzo said litigation is an essential part of the tax and superannuation systems.

 

"The right to dispute an assessment is a fundamental safeguard of the system, ensuring that the laws are applied fairly and properly," Mr D'Ascenzo said.

 

"It is important the community know the facts about the operation of Australia's tax and superannuation systems and can exercise their right to challenge decisions on objections and have them independently considered.

 

"However, court action is not necessarily about winning or losing, it is also about testing the law when there is uncertainty in its interpretation. The ATO supports litigants where this is in the public interest."

 

This is highlighted by new analysis of the 17 High Court decisions since 1 July 2008. In 11 decisions (65 per cent) the law was clarified, in a further 5 decisions (29 per cent) the Australian Government announced policy or law change to provide certainty. Further to this, 8 of the 17 decisions were test cases funded by the ATO. 7 of these 17 decisions agreed with the ATO's application of the law.

 

This edition of Your case matters highlights that:

  • Very few taxpayers dispute their assessments (less than 1 per cent). Even when assessments are the result of audit adjustments, less than 6 per cent of these taxpayers dispute their adjusted assessments.
  • The Administrative Appeals Tribunal (AAT) is the preferred venue for small business and individual taxpayers and the Federal Court for large business taxpayers.
  • There is a very good track record of resolving taxpayer appeals prior to hearing, around 80 per cent for tribunals and around 55 per cent for courts.
  • The majority of litigation decisions are favourable to the ATO, 75 per cent of AAT decisions and 51 per cent of court decisions. Only 5 per cent of litigation decisions are appealed.
  • Litigation numbers declined between 2007-08 and 2009-10, as mass-marketed scheme-related cases steadily declined.
  • In the past two years tribunal litigation numbers have increased, reflecting extra ATO compliance activity in the individuals and small business markets.
  • There are good signs that the use of informal and formal alternative dispute resolution techniques are leading to resolving more litigation cases prior to hearing.

"These findings highlight the mutual benefit to be had if the ATO and taxpayers work closely together. After all, the tax and superannuation systems are community assets," Mr D'Ascenzo said.

 

"Our focus is to minimise and resolve what can often be costly disputes as early as possible through alternative resolution approaches such as direct communication and negotiation."

 

Your case matters can be downloaded at www.ato.gov.au.