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Tax dispute resolution – early engagement is the key

Tax dispute resolution – early engagement is the key

Jacqui McGrath and Kristie Schubert discuss findings from the ATO's annual report regarding the dispute continuum.


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The recently published annual report of the Australian Taxation Office (ATO) highlights the effectiveness of early engagement with the ATO in the dispute continuum.

The annual report evidences this effectiveness both in monetary terms and overall reduction of cases proceeding to external review. An overwhelming 68 percent of the settlements were achieved with the ATO before or during an audit. During these phases, there was a 41 percent reduction achieved in the ultimate settled tax liability compared with the initial tax liability assessed by the ATO.

The greatest variance between the ATO’s initial tax position and the ultimate sum settled upon occurred during the objection stage (with a 62 percent reduction in the quantum of tax assessed).

In terms of market segment, the report makes it clear that the micro-businesses (having annual income of less than $2 million) and individuals were most likely to settle with the ATO – making up about 70 percent of the total settlements over the last income year.

High wealth individuals and small businesses make up a further 24 percent of the total settlements, leaving 6 percent of settlements in the medium, large and multi-national business sectors.

It is apparent from the report that the ATO attribute these encouraging early dispute resolution statistics to the implementation of a number of programs including:

  • In-house facilitation 
  • Fast-track objections
  • Dispute Assist (a pilot commenced to guide unrepresented individual taxpayers through the process).

The ATO report an 89 percent ‘win rate’ (either fully or partly favourable) for tax technical matters if the dispute proceeds to external review either by a Court or the Administrative Appeals Tribunal.

As specialist tax dispute resolution practitioners, we know only too well how important it is to engage with the ATO to achieve early resolution of tax dispute. In our experience, the key is to explore the often bespoke alternative dispute resolution avenues on offer by the regulators, and do so early.

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