Has the ATO made a wrong call on your tax assessment? Here’s what to do

If you believe your tax assessment is incorrect, the first step should be to go over your tax return or activity statement to check details against your notice of assessment. If you still believe the assessment is wrong, or if you have extra information that may change it, an amendment can be sought from the Tax Office (which we can help you with).

But if the Tax Office disagrees that there is a mistake, you can lodge an objection to that decision. You can also object if it amends an assessment and has taken a different stance to you (for example, you wanted to include a deduction but were allowed only part of it).

The Tax Office requests that objections be in writing (you can use one of its forms, which we can provide, or ask us to write an objection for you), detailing all the reasons you think a decision is incorrect. This should include, where relevant, references to legislation, rulings or case law. It will also be necessary to include any supporting documents and information that relates to the decision.

The Tax Office will generally review its original decision, and says these reviews will be carried out by a tax officer who was not involved in the original decision. It will then let you know the outcome in writing (referred to as an “objection decision”), either directly or via this office. However if you’re still not satisfied, the next step is to ask for an independent external review of the Tax Office’s actions and its decisions about your tax affairs.

Tax laws specifically give you the right to go to the Administrative Appeals Tribunal (the tribunal) or the Federal Court of Australia for a review of some of the Tax Office’s actions or decisions. When the Tax Office lets you know its decision, it should also explain how these options differ and how to access each. You generally have 60 days from the date of this decision notice to seek a tribunal or court review.

When taking the tribunal or court option

The burden of proof in the taxpayer’s lap, so you will need to go into the tribunal or court being able to prove that the tax assessment is excessive – or, more pertinently, that your idea of the tax outcome is the correct one – and support this with evidence, documents, and sound technical analysis.

The tribunal is less formal than a court hearing, but it can confirm, vary or set aside the Tax Office decision. You can appear yourself or be represented, and there is an application fee, which is refunded if the hearing goes your way.

Under the umbrella of the tribunal is the Small Taxation Claims Tribunal, which provides a quicker and cheaper review if the amount of tax in dispute is less than $5,000. Either way, if you are not satisfied with the tribunal’s decision you can appeal to the Federal Court.

However once at the Federal Court, procedures get much more formal. You will generally need legal representation and there are a lot more fees (filing fee, “setting down” fee and daily hearing fee, for example).

After this level of intervention, the next steps up the legal ladder are the Full Federal Court and then the High Court – but these are rare options for most taxpayers, and these courts won’t grant every appeal that is requested.

Taking one for the team

If you think what you’ve been through can help level the tax playing field for the rest of the nation’s taxpayers, it could be possible to apply to have your case funded under the “test case litigation program”.

This operates alongside all the other dispute resolution protocols, and can reimburse some or even all of your legal costs if it is decided that your case has important implications for the wider community and the administration of the tax system.

It may be, for example, that your case happens to involve a particular area of tax law in which there is uncertainty and that has not been tested in the courts before – and that the public interest will be served by seeing it go through the courts. Applicants are reviewed by an independent panel of legal and accounting professionals and senior tax officers.

See our office if you think any of the above applies to your tax affairs.

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