Code of settlement practice

Borderline questions of law and fact

16. Even if the application of the law is uncertain, or there is insufficient information to draw a firm conclusion, it has always been open to the ATO to consider whether or not an adjustment on a particular issue should be made. In cases of this nature, consideration of the law is often on an 'all or nothing' basis. For example, where the deductibility of losses depends on whether a taxpayer is carrying on a business, the issue will be decided by considering whether or not the facts lead to a conclusion that a business is being carried on. Accordingly, in some cases, it will be concluded on balance that the taxpayer's position represents the better view. In reaching such conclusions the ATO is merely carrying out its responsibility to raise assessments in accordance with the law. These cases are not intended to be covered by the Code unless other disputed issues in the case are settled. However, they need to be properly documented and available for inclusion in the IQF and possible external review.

Sections within Part 2: Factors affecting settlement

• Meaning of settlement
• Disputes as to quantum
• Borderline questions of law and fact
• Legal basis for settlement
• The good management rule
• When settlement discussions may occur
• Circumstances where it would be generally inappropriate to settle
• Circumstances where it may be appropriate to settle
• Where unrelated issues are involved: global settlements
• Relevance of ability to pay
• Alternative dispute resolution, including mediation
• Settlements and prosecutions
• Treatment of penalties and interest charges