Question:
Code of settlement for tax disputes
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
The Tax Office has issued a Practice Statement which provides details of its code of settlement for taxation and superannuation disputes which includes disputes involving tax debt.
The Tax Office will consider settling disputes because it is obliged to administer the taxation system in an efficient and effective way and use “discretion and good sense”.
The following factors are considered when deciding whether or not to settle:
- The relative strength of the party’s position;
- The cost versus the benefits of continuing the dispute; and
- The impact on future compliance for the taxpayer and broader community.
Settlement would generally not be considered where:
- There is a contentious point of law which requires clarification;
- It is in the public interest to litigate; or
- The taxpayer’s behaviour is such that there is a need to send a strong message to the community.
The Practice Statement notes that any decision to settle or not must be a fair, effective and efficient means of resolving the matters in dispute.
If a settlement is reached, it will be finalised by the parties signing a written agreement which sets out the terms. Such an agreement will provide a reasonable basis for treating similar issues in future years, unless that treatment is specifically denied, or:
- The taxpayer’s circumstances change materially;
- The law remains unclear;
- There are subsequent amendments to the law;
- A taxation ruling is subsequently released on the issue;
- There is a subsequent court or tribunal decision on the issue.
The Tax Office has prepared a document called ‘A practical guide to the ATO code of settlement’ and has also prepared an “ATO Disputes Policy’ and ‘ATO Dispute Management Plan 2013/14’. All of these documents are available on the ATO website.
WTB 2015/41
Andrew and Tony Lovett
12 February 2015
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