If you disagree with a decision made by the Australian Taxation Office (ATO) about your tax affairs, you may have options to formally challenge it. For certain decisions you may be able to lodge an objection, which involves an independent area of the ATO internally reviewing the decision.
It’s important to understand the nuances of this process, as well as some simple things you can get right, to ensure you put yourself in a position to achieve the best possible outcome with the ATO.
Here, Michael Buscema, Aptum’s practice lead for tax disputes, answers some of the most frequently asked questions about ATO objections and tax disputes with the ATO.
For 11 years prior to joining Aptum, Michael worked for the ATO and Commonwealth Treasury, holding a range of senior positions including Acting Assistant Commissioner of the ATO. In recent years Michael has been instrumental in steering the ATO’s post COVID-19 debt recovery strategy, giving him unique insights into the ATO’s latest approach.
There are a variety of decisions the ATO can come to regarding your tax situation, and sometimes it can be hard to navigate what they are.
We are often asked: Can I lodge and objection? or Should I lodge and objection?
ATO objections are generally a pathway for you where you disagree with how the ATO has come to determining what you owe. This is different to the situation where you have reported something to the ATO, and may not be able to pay it.
Common scenarios that give rise to objections can include:
Disagreement with income tax
Disagreement with GST
Disagreement with superannuation guarantee charge
Disagreement with penalties owed, based on a shortfall of any of the above amounts after the ATO has amended your assessment
If any of these situations arise for you, then the next step of the dispute process following an audit decision would typically be to lodge an objection with the ATO.
2. How do you raise an objection with the ATO?
Raising or lodging an objection is relatively simple, though there are some key things you need to make sure you get right.
To initiate an objection, the ATO provides a form on their website with the relevant details for taxpayers to lodge objections. Alternatively, you can choose to write a letter to the ATO.
But regardless of the contact method, the ATO will be looking for the same information. You and your advisor will need to set out fully and in detail the reasons and grounds for why you disagree with the decision you are objecting to.
You must also provide a declaration that the information you give in the objection and supporting documentation is true and correct. For advisors, you must provide a declaration certifying the documents have been prepared in accordance with information provided by your client, that you have received a declaration from the client stating the information is true and correct and are authorised by your client to submit the objection. Specific wording for these declarations are provided on the ATO website.
This is the first step in lodging an objection. From there, you and your advisor will investigate in more detail what information you may need to provide in support of your objection.
3. What makes a strong objection?
Often, in preparing an objection, you have just come out of an audit with the ATO. It is common to come out of an audit and be left thinking: I don’t understand how the ATO arrived at the decision they did.
You may then be focused on trying to demonstrate why the decision at audit is incorrect. However, the task at objection is for you to be able to demonstrate facts to support the ATO coming to a different decision.
Let’s consider the ATO’s perspective at audit. At audit, the ATO’s job is to piece together a wide body of facts and information to come to what they think is the amount of tax you owe. In doing so, the ATO forms a story about what your position is and what your behaviour is. But sometimes, this information isn’t pieced together in a way that reflects your actual experience.
In order for you to craft a strong objection, it is crucial to identify those areas where you feel that the ATO has understood some of the facts, but not all of them. The crux of the task becomes: what information do you have that can be put together and presented to fill the gaps in that story?
Being able to effectively represent your story, with the relevant supporting evidence, will go a long way to resolving your dispute with the ATO.
4. What makes an ATO objection fail?
ATO objections can often fail when a taxpayer or their advisor get caught up in why the ATO came to the decision they came to at audit, rather than providing evidence that enables the ATO to arrive at a different decision.
This often involves agitating:
How the ATO has applied a law or a technical position (which can sometimes be appropriate but is often not the core of a dispute).
How the ATO has viewed all the facts, attempting to find holes in their story.
Unfortunately, these are not the most effective tactics for dealing with the ATO at objection.
An objection is the opportunity to have someone independent of the ATO’s audit area consider your case afresh. So, the best way to take advantage of that opportunity is to consider all the information you have at hand, and present that information in a way that explains your story, such that an independent person can come to a different view than what the auditor did.
5. What happens if I miss a deadline for lodging an objection?
If you miss a deadline for lodging an objection with the ATO, there is the possibility to request an extension to have your objection considered.
To obtain an extension, you must present a legitimate reason for the delay and convince the ATO that your situation justifies it. Given that you generally only have 60 days following an audit decision to be able to object, it is possible to present compelling reasons for requiring an extension.
Once you have received your audit decision, if you are considering taking further action, then it is best to seek advice quickly. It is not guaranteed that an extension will be afforded to you, so you don’t want to run the risk of having resolution pathways unavailable to you simply because you thought you could get an extension.
6. How long does an objection take?
The ATO objection process can be prolonged. It is not uncommon for the objection process to last more than a year. For complicated matters, it can take several years. That said, there are ways that you can approach an objection to shorten the objection period.
Conveniently, the best way to speed up the objection process is also the best way to give yourself the highest chance of achieving the outcome you want. This involves ensuring that your objection is focused only on the critical issues where you are opposed to the ATO.
Have a discussion with your advisor about what information and documentation will be essential to proving your version of events, or any discrete or critical points. This may sound elementary, but it is possible (and common) to get caught up collating and presenting information that is superfluous to what the ATO needs to make a decision in your favour. You may want to provide as much evidence as possible, but finding and presenting only the relevant evidence will help bring your resolution forward.
Of course, you will also need to collate this information in a timely manner. An objection is often prolonged simply because there is a request for information or documents from the ATO that goes back and forth over a very long period of time.
7. Can I amend my tax return instead of lodging an objection?
It is possible to amend your tax return instead of lodging an objection. However, whether you choose to amend your tax return or lodge an objection comes down to two things.
If you have made a mistake in your tax return, or if there’s an omission of something in your tax return, the general approach is to lodge an amendment if you are within the allowable timeframe. Depending on your circumstances, this is generally between 2-4 years.
If, however, the period for lodging an amendment has expired, or if you disagree with how the ATO has come to a position on your tax affairs or applied the law to your tax affairs, then you’ll be better off lodging an objection.
If you have any questions about ATO objections and tax disputes that haven’t been answered here, please feel free to reach out to Michael Buscema.
For immediate clarity in your commercial or tax dispute, contact Aptum.
