Dangers for Tax Payers with Tax Objections

If you have received an amended assessment for the GST or for income tax, or a notice of administrative penalty and you disagree with the assessment or the notice, what can you do?

All taxpayers have a right to lodge an objection to a GST or income tax assessment or notice of administrative penalty with the Commissioner as a first step to the assessment or notice being reviewed by an Officer at the Australian Taxation Office.

Since a taxpayer carries the burden of proving that the tax assessment is excessive, a taxpayer must establish by evidence the correct tax position. It is not sufficient for a taxpayer to show that the assessment is excessive by demonstrating an error made by the Commissioner. We have highlighted below the major dangers inherent in the objection process and some practical tips on how to avoid these problems.

What are the major dangers of the objection process for taxpayers?

In our experience, the most common problems faced by taxpayers when they are seeking a review of a GST or income tax assessment or notice of administrative penalty through the objection process are as follows:

• the decision made by the Commissioner is not a decision which cannot be disputed by using the objection process;

• the taxpayer objects before an assessment is issued believing that an audit decision is the amended assessment;

• the taxpayer attempts to lodge an objection after a trustee in bankruptcy or a liquidator has been appointed;

• the taxpayer requests an amendment to a tax or BAS return in relation to a mistake or omission where they should have lodged an objection to ensure they gain appeal rights in the event that the Commissioner disallows the amendment

• the taxpayer fails to provide an adequate explanation or sufficient information in the objection

• there is a lack of written evidence provided with the objection, including documents such as contracts, tax invoices and receipts to substantiate the correct tax position;

• taxpayers waiting until debt collection has commenced by the Australian Taxation Office, which may have the practical effect of limiting the taxpayer’s ability to lodge an appeal in the future if the objection is disallowed

• a taxpayer may be out of time under the Taxation Administration Act 1953 to lodge an objection and fail to provide an explanation for the delay

• a taxpayer may be out of time to request the Commissioner amend an income tax return or BAS return

• the taxpayer fails to advise their accountant of all the relevant information prior to the lodgment of an income tax return or BAS return

• the taxpayer fails to set out each of the possible alternative legal arguments and only includes the legal outcomes they are seeking limiting their later rights of appeal.

• There is a risk that an objection will be treated as invalid by the Commissioner, or the Commissioner may disallow the objection based on the limited information provided.

• Taxpayers must also avoid blanket denials of facts as a statement in an objection which is found to be false and untrue can lead to conviction and imprisonment.

What can you do to avoid these common problems?

Taxpayers should consider the following strategies before lodging an objection to a tax assessment or notice of administrative penalty:

• obtain advice before you consider lodging an objection. The issue may concern the interpretation of the law, or there may be alternative grounds to argue to establishment a favourable tax outcome

• maintain physical or scanned copies of all tax records

• collect all your relevant tax records and determine which documents may be missing

• consider whether you may be able to obtain documents using Commonwealth, State or Territory Freedom of Information legislation

• carefully consider the questions to be asked and the legal issues to be addressed

By taking proactive steps before lodging an objection to a GST or income tax assessment, you can maximise your chance of having your objection allowed at an early stage and avoid the need for a costly appeal to the Administrative Appeals Tribunal or the Federal Court.

The Commissioner is not prohibited by the lodgment of an objection, or appeal against an objection decision from recovering a disputed tax debt. The Commissioner however generally follows his published approach set out in PS LA 2011/4.

Can the Commissioner take steps to collect disputed tax debts?

In the case of a company, the Commissioner may:

• issuing a garnishee notice to the company’s bankers• issuing a director’s penalty notice to each of the

directors• serve a statutory demand on the company• commencing legal proceedings for the amount of

the debt• make an application to wind up the company.

Contact us about your objection issues

Our team of experts can provide you with strategic advice and assistance with the preparation of an objection to your GST or income tax assessment. Call Robson Hayes Legal on (08) 6181 0790 or email us at info@robsonhayes.com.au to discuss your tax assessment or administrative penalty issues.

For further information on:

• Objections against income tax assessments, see TR 2011/5• The Commissioner’s policy on the collection of disputed tax

debts, see PS LA 2011/4.

THANK

YOU