Objections, third party fraud and identity theft
The Australian Taxation Office (ATO) is actioning objections with claims of third-party fraud or identity theft. A common scenario is that a refund is claimed fraudulently and when detected by the ATO, the taxpayer asserts this was done by a third party or through coercion. The taxpayer argues they are not responsible for payment of the consequent amended assessment.
Objections and Review (O&R) investigate contentions of third-party fraud or identity theft and these objections are often complex. Following an investigation, if O&R suspect third-party fraud, the taxpayer is referred to the relevant part of the ATO for consideration and action, such as account protections or account remediation. If third-party fraud is confirmed, then the victim is not held liable for the debt and the ATO will seek to recover the fraudulent amount from the third-party. If we find the taxpayer has committed the fraud, or was complicit in the fraud, we will take firm action to recover debts directly from the taxpayer.
Some objections have been lodged by taxpayers who present as vulnerable; providing details of domestic violence, mental health, incapacity or are minors. These taxpayers are supported through the objection process by our Dispute Assist service. In relation to any outstanding obligations, we take a tailored approach to supporting these taxpayers. We are developing a Vulnerability Framework in partnership with key industry, advocates and support groups, as part of an ongoing focus on improving our approach for vulnerable taxpayers.
Member comment
Taxpayers, often vulnerable are seeking support from national tax clinics and representatives are seeking advice from professional bodies, on these issues and interacting with the ATO on these issues.
Litigation
Key issues for the ATO in recent litigation cases include transfer pricing, diverted profit tax, integrity of trusts, dividend stripping and Division 855 of the Income Tax Assessment Act 1997 regarding testing the meaning of real property.
We noted the recent procedural changes of the High Court of Australia in relation to the disposition of special leave applications which will now be based on written submissions only. The high court has stated that oral hearings for special leave will be rare.
For matters lodged before all courts and tribunals, most of the ATO’s litigation matters originate from action taken by the private wealth audit area and most appeals lodged are by taxpayers from the small business client experience.
In relation to litigation outcomes, almost three-quarters of decisions and judgments are favourable to the ATO. In matters where the taxpayer is successful, it is often due to previously requested information being provided at the litigation stage.
Objections
The ATO received and finalised a record number of objections in the 2023–24 year. Almost 29,000 objections were received, an increase of 65% in 3 years and more than 30,000 objections were finalised.
Most of the increased objection receipts were in scale markets however, there was an increase across all objection markets impacting on the client experience. The increased receipts and resourcing challenges lead to peak backlogs in late 2023 and early 2024. O&R implemented a suite of efficiency measures to maximise workflow and enhance the intake of objections, leading to a reduction in allocation delays and officers resolving objections. By 30 June 2024, stock on hand had reduced to business-as-usual levels. O&R will continue to focus on the health of our objections stock but note that it is often difficult to predict the number of incoming objections.
Member comments
A change of objection officer can lead to delays in case progress and in large cases, there is interaction between objection and audit teams.
We acknowledged that in some instances a change in objection officer cannot be avoided. In relation to the interaction between objection and audit teams, the ATO follows the guidance set out in Practice Statement Law Administration PS LA 2023/2 Communication protocols governing ATO objections.
Other business
The government announced in December 2022 that the Administrative Appeals Tribunal (AAT) would be abolished and replaced by a new federal administrative body the Administrative Review Tribunal (ART). Legislation to abolish the AAT and replace it with the ART passed the Parliament in May 2024. Consultation on the new ART has been undertaken by the Attorney-General’s department with key stakeholders. The ART will commence on 14 October 2024. The Honourable Justice Emilios Kyrou AO is the inaugural President of the ART.
Attendees
|
Organisation |
Member |
|---|---|
|
ATO |
Andrew Orme (Chair), Objections and Review |
|
ATO |
Fiona Knight, Office of the Chief Tax Counsel |
|
ATO |
Jillian Kitto, Frontline Operations |
|
ATO |
Jonathan Todd, Office of the Chief Tax Counsel |
|
Administrative Appeals Tribunal |
Michael Abood |
|
Australian Small Business and Family Enterprise Ombudsman |
Dr Craig Latham |
|
Chartered Accountants Australian and New Zealand |
Ashley King |
|
Chartered Accountants Australian and New Zealand |
Karen Liew |
|
Corporate Tax Association |
Simon Staples |
|
CPA Australia |
Karen Wong |
|
Law Council of Australia |
Angelina Lagana |
|
Law Council of Australia |
Hugh Paynter |
|
National Universities Tax Clinics |
Annette Morgan |
|
The Tax Institute |
Chris Kinsella |
|
The Tax Institute |
Michael Wells |
|
University of Newcastle |
Tania Sourdin |
Guest attendees
|
Organisation |
Attendee |
|---|---|
|
ATO |
Alexander Mossman, Office of the Chief Tax Counsel |
|
ATO |
Debra Goldfinch, Small Business |
|
ATO |
Diana Bedelovski, Objections and Review |
|
ATO |
Elissa Walker, Individuals and Intermediaries |
|
ATO |
Michael Jones, Objections and Review |
|
ATO |
Ram Pandey, Office of the Chief Tax Counsel |
|
ATO |
Scott Bradford, Frontline Operations |
|
CPA Australia |
Jenny Wong |
Apologies
|
Organisation |
Member |
|---|---|
|
ATO |
Andrew Watson, Individuals and Intermediaries |