When in a dispute with the Australian Taxation Office (ATO), attention needs to be given on how best to manage and resolve matters that have proceeded to objection.
This is the sixth in a seven-part series of articles on aspects of, and strategies that can be employed in, a tax dispute with the ATO.
A taxpayer may object against an adverse taxation decision by lodging an objection with the ATO. We discuss below some key factors in preparing and managing an objection.
Why engage a tax lawyer to assist in preparation of an objection?
Lodging a taxation objection is deceptively complicated. Taxpayers should be aware that lodging an objection is the first step in the legal process. Therefore, it is prudent to engage a tax lawyer in the preparation of an objection.
Objections often also require further queries or clarification of further facts from both the tax adviser or the ATO and will often be a time-consuming exercise. Your tax adviser should manage the time and stresses of this process.
In addition, engaging a lawyer provides an independent view in preparing the objection whereas a taxpayer’s tax agent may have been involved in the taxpayer taking the position that led to the tax dispute.
Entitlement to lodge an objection
A taxpayer must have an entitlement to object; they must be dissatisfied with, and legally affected by, a decision made by the Commissioner of Taxation (Commissioner) (whether an assessment, determination, notice or decision, or failure to make a private ruling). The relevant Tax Acts grant the entitlement to object to a decision made by the Commissioner.
An objection can dispute the existence of the facts, legal issues, or conditions or rights necessary for the Commissioner to have acted or the choices arising from the exercise by him of a discretion.
Some assessments and decisions cannot be objected against, if dissatisfied with a decision of this nature a different recourse must be looked for. For example, a taxpayer cannot object against the imposition of either general interest or a shortfall interest charges however the taxpayer may request remission by the Commissioner of these amounts. (In certain circumstances a taxpayer can object against a decision by the Commissioner not to remit shortfall interest).
Approved form
Once an entitlement to object has been established, an objection must then be lodged with the ATO on the approved form. The ATO publishes approved forms on its website. Failure to submit an objection on the approved form and with all relevant information risks potentially invalidating the objection.
Objection period
Objections must be submitted within specific time frames depending on the nature of the decision being objected against. Time limits may vary between a sixty-day, two year or four year period from the date of service of the decision (such as an assessment) or occurrence of an event.
Broadly, in the case of income tax assessments, the objection must be lodged by the later of either the amendment period of the original assessment or sixty days after service of the amended assessment. For original income tax assessments, a taxpayer has either two years (for individual or small business entities) or four years (for other taxpayers, such as companies and trusts) from the date of service of the assessment to object. In relation to administrative penalty assessments and reviewable indirect tax (such as GST) decisions, the objection period may be only sixty days.
In the event an objection is lodged out of time, the taxpayer can seek to have it considered by requesting the ATO deal with the objection as if it had been lodged in time. As a good practice, taxpayers should always exercise care and ensure, where possible, that the objection is lodged within the relevant objection period.
It is essential to speak to your tax adviser as soon as possible after receiving an adverse notice or assessment to ensure that an objection can be prepared and lodged within time and without having to rely exercise by the Commissioner of his discretion.
Preparing objections
Careful drafting of objections is essential. A taxpayer’s dispute in court is limited to the grounds in the objection. Therefore, an objection must state all grounds relied upon in the dispute.
The outcome – the objection decision
Once an objection has been lodged, the Commissioner must decide the objection. The Commissioner must decide whether to allow (either in whole or in part) the objection or to disallow it. Taxpayers will receive a notice outlining the Commissioner’s response and decision to their objection.
If the Commissioner has either not made a decision on the objection or has not issued an information request in relation to the objection within sixty days of lodgement, the taxpayer may give written notice to the Commissioner compelling him to make a decision in relation to the objection. By compelling the Commissioner to make a decision, even if unfavourable, the taxpayer gets the Commissioner to provide his reasons and this may provide the basis for the decision to be reviewed or appealed through the Administrative Appeals Tribunal (AAT) and/or the Federal Court (Court).
In our experience, the Commissioner often takes more than sixty days to decide on an objection.
In the seventh part of this series, we will consider seeking a review or appeal of a decision made by the ATO to either the AAT or the Court.
At Sladen Legal, one of the areas our tax team specialises is in tax disputes including the preparation, lodgement, and management of taxation objections. Please contact us if you have any further questions or need our help.
Sam Campbell
Senior Associate | Business Law
M +61 423 515 454 | T +61 3 9611 0135
E: scampbell@sladen.com.au
Neil Brydges
Principal Lawyer | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E: nbrydges@sladen.com.au
