Code of settlement practice

As a general guide, settlement may be an appropriate way to resolve a matter if:

the cost of litigating (including internal ATO costs) is out of proportion to the possible benefits, having regard to the prospects of success (including collection of the tax), and likely award of costs, assessed as objectively as possible
there are complex factual or quantum issues in contention, or evidentiary difficulties, or there is genuine uncertainty as to the proper application of the law to the facts, sufficient to make the case problematic in outcome or unsuitable for resolution through the AAT or courts (for example, where the issue is peculiar to the particular taxpayer, and the opposing positions are each considered reasonably arguable). This is particularly so where the settlement includes an agreed approach for future income years
a participant or group of participants in a tax avoidance or other arrangement has come to accept the Commissioner's position and settlement is around the steps necessary to unwind existing structures and arrangements
the settlement will achieve compliance by the taxpayer, group of taxpayers, or section of the public, for current and future years, in a cost-effective way
unique or special features exist which make it unsuitable for resolution through litigation, for example, a dispute about the valuation of a unique asset.

As a general rule, the ATO will not enter into a settlement where the outcome would be contrary to its established view of the law (for example, in a public ruling). However, this should not be taken to mean that the ATO is not prepared to reconsider the correctness of its view. Should cases come to light where the application of a ruling or an otherwise accepted precedential ATO view would produce a result which could be regarded as unintended, unreasonable or incorrect, steps should be taken to have the matter reviewed, or to approach Treasury to recommend to government that there be legislative change.

Last Modified: Wednesday, 15 May 2013