If you disagree with the Australian Tax Office’s (ATO) assessment of how much tax you have to pay, you can lodge an objection with the ATO who will review your tax assessment. If the ATO rejects your objection, you can complain to the Commonwealth Ombudsman, or apply to the Administrative Appeals Tribunal, or appeal to the Federal Court. Time limits apply for lodging objections, applications and appeals.
Lodging an objection
As an individual, you generally have two years in which to lodge an objection with the ATO after receiving a notice of assessment.
Most small businesses (i.e. with a turnover of less than $2,000,000) also have two years in which to lodge an objection with the ATO.
If you are an individual who carries on a business that is not a small business, are a partner in a partnership, or are a beneficiary of a trust that is not a small business, you may have four years in which to lodge an objection, depending on your circumstances. This period may be extended in appropriate circumstances.
In some situations, you will receive an amended assessment from the ATO. In these circumstances, you may object to the amended assessment by the later of:
• two years for most individuals and small businesses or four years for other taxpayers from the date the amended assessment was given to you; or
• 60 days from the date the amended assessment was given to you.
A notice of objection form is on the ATO’s website.
Your objection must adequately raise the disputed issues and the grounds you are relying on for claiming that the assessment is incorrect. Statements such as “it is incorrect” or “it is excessive” will not be sufficient without evidence to support them. Should your objection ultimately come before the AAT or a court, you may be limited to arguing the grounds of objection which were sent to the ATO. Therefore, it is most important that these grounds are clearly and comprehensively discussed. For this reason, it is often desirable to have your objection prepared by a professional tax adviser.
Once the objection is sent to the ATO, it will be considered by an officer who did not make the original decision. Where the ATO has not made a decision within 60 days of the objection being lodged, you may write to the ATO requiring a decision to be made. Generally, if no decision is made within a further 60 days, the objection is deemed to be disallowed. This will enable you to pursue other remedies without further delay.
Where the ATO rejects an objection, you generally have 60 days in which to either:
• apply to the AAT for a review; or
• appeal to the Federal Court.
The Federal Circuit Court also has jurisdiction to review some administrative decisions, such as those of the ATO. An objection will generally be heard by the Taxation and Commercial Division of the AAT (the Small Taxation Claims Tribunal ceased to exist on 1 July 2015).
There are fees and charges payable to courts and tribunals when you apply to have a decision of the ATO reviewed. If the amount of tax being disputed is less than $5,000 – or if the tax officer has refused to extend the time for you to lodge a taxation objection, or refused your request to be released from paying a debt regardless of the amount involved – a lower application fee of $91 is payable where an application is lodged on or after 1 July 2018. For most other applications, the standard application fee is $920 (as of 1 July 2018). Details of the other fees and charges can be found on the website of the particular court or tribunal (the AAT: www.aat.gov.au; the Federal Court: www.fedcourt.gov.au).
If your argument with the ATO is one of fact, it is probably preferable to have the matter heard by the AAT. Proceedings are relatively informal and the AAT is not bound by the strict rules of evidence that apply in courts. Further, if you are unsuccessful, you will generally not have to pay legal costs, although you will have to pay your own legal costs. The AAT has wider power than a court to review the exercise of the ATO’s discretions. Hearings are conducted in private, your identity will not be published and, if you wish, you may be represented by lawyers or others.
Where the matter involves a question of law, or is regarded as a test case, it may be preferable to have the matter heard by the Federal Court, despite the formality and cost. In test cases, the ATO may undertake to pay your costs, even if the ATO succeeds in the Federal Court.
It is possible for you or the ATO to lodge further appeals with the full court of the Federal Court, though such appeals will be restricted to questions of law. The final stage in the appeal process involves an appeal to the High Court, which may only occur if that court gives special leave to appeal.
If you make an application, you must prove that the assessment is excessive. In other words, you will not be successful merely because the ATO cannot justify its assessment of your tax liability.
Since 1 May 2015, if you are dissatisfied with administrative action taken by the ATO, you can complain, without charge, to the Inspector-General of Taxation (IGT). The Inspector-General heads a team of experts who investigate and resolve taxpayers’ disputes with the ATO. Complaints do not need to be about technical legal matters; they can relate to the fairness and efficiency of ATO procedures and policies. Note that the IGT may be reluctant to become involved in matters that are more appropriately dealt with under the objections and appeals processes. The IGT can recommend that the ATO reconsider decisions, explain decisions further, pay compensation, or change its procedures. While these recommendations are not binding on the ATO, the IGT is able to publicise such findings and report them to the Tax Commissioner, the treasurer, the prime minister or to parliament. Complaints may be made in writing, by phone, in person or by using the online complaints form. For the IGT’s contact details, see “Contacts”.