Damian O’Connor, Managing Principal of Tax + Law, discusses recent developments in Small Business Tax Disputes. To hear more on this topic, Damian will present a seminar on Dealing with the ATO Audits, Enquiries and Tax Disputes at the 5th Annual Small Business Tax Essentials Conference on 30 May and 13 June.
In the last few weeks there have been two important events that may impact on how clients try and manage differences of opinion they have with the ATO about the correct amount of tax payable or reasonable payment arrangements when cash is tight.
Firstly, the Small Business Ombudsman released a report on 29 April 2019 which looks at the ATO enforcement of debt recovery, particularly where there is a dispute in the AAT over the correct amount actually payable.
In short, the report concluded that:
- Stronger debt recovery action by the ATO kills small business;
- ATO action needs to be (and seen to be) proportionate, fair and consistent; and
- The ATO does not engage with small businesses in the same way it expects small business to engage (with the ATO).
In response to the report the ATO pointed out that perhaps every taxpayer who disputes a tax debt may not be acting in good faith.
While that may be the case, a key message from the Ombudsman’s report is in a very large organisation like the ATO, sometimes well thought out policies that aim to appropriately balance ATO and the taxpayer’s interests can be applied unfairly with severe consequences for small business owners.
From 1 March 2019 the AAT has also introduced a Small Business Tax Division to deal with requests for review by small business entities .
Secondly, and on a more positive note, small business entities may be able to receive some legal assistance from the Australian Small Business and Family Enterprise Ombudsman, and if the ATO decides to use external lawyers the ATO may fund the taxpayer to do likewise.
Disputing an issue in the Small Business Tax Division does will not mean that the ATO will simply run dead, and taxpayers still have the onus of proof to convince the Tribunal or the ATO that they are right.
These recent developments do provide some hope that where a taxpayer has a genuine dispute about a tax issue or tax debt the pathways for resolving those disputes may be a bit more efficient and cheaper than they have been in the past.
Damian O’Connor has a wealth of experience in tax, commercial law and family legal issues in Melbourne and Brisbane, as a lawyer and a tax partner with national law firms. Damian provides practical technical advice on complex tax issues, commercial and family wealth structuring advice and legal documentation. He has decades of experience in managing high risk, high stress interactions with revenue authorities. He has been recommended as a leading Tax Lawyer in Doyle’s Guide, and contributes to the continued development of tax expertise through his involvement with the Tax Institute and presentations for Television Education Network, Legalwise Seminars, Law Central, the Law Institute of Victoria, the Queensland Law Society and other professional bodies, professional associations and universities. Contact Damian at firstname.lastname@example.org or connect via LinkedIn .