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  • Detailed findings

    As part of our review two questions were considered:

    Question 1

    Was the decision to grant or refuse release made in accordance with the content and general direction of the ATO’s Practice Statement Law Administration 2011/17 Debt Relief?

    Yes: 265 cases

    No: 5 cases

    Review observations are as follows:

    • The guidance for determining ‘serious hardship’ referred to in the ATO’s Practice Statement Law Administration 2011/17 Debt Relief was used in addressing this question.
    • The ATO’s PS LA 2011/17 requires that release decisions be made on the basis of whether taxpayers would suffer serious hardship if the tax debt was to remain outstanding. The policy states that 'Serious hardship' is given its ordinary meaning. We consider serious hardship to exist where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation, or education.'
    • Tests are applied to determine whether serious hardship exists. The object of the tests is to determine whether the consequences of paying the tax would be so burdensome that the person would be deprived of what are considered necessities according to normal community standards.
    • The ATO uses three tests to assess the taxpayer’s application:
    • The taxpayer’s personal income and expenditure is assessed to determine whether the taxpayer could meet the tax liability without suffering serious hardship (Income/Outgoing test).
    • The taxpayer’s personal assets and liabilities are assessed to determine whether the taxpayer has sufficient means to discharge the tax liability without suffering serious hardship (Assets/Liabilities test).
    • Other factors including, but not limited to, the taxpayer’s lodgement and compliance history, whether they had previously sold assets without making sufficient provisions to meet tax liabilities and whether a grant of release would not alleviate the serious hardship (Other Factors test).
    • In 265 of the cases reviewed the release decision was consistent with relevant aspects of the ATO’s PS LA 2011/17, as evidenced by the ATO’s application assessment.
    • The 5 cases where the decision was found not in accordance with the content and general direction of the ATO’s Practice Statement Law Administration 2011/17 Debt Relief were corrected in line with procedures following advice received from Operational Policy, Assurance and Law (OPAL).

    Question 2

    Was the taxpayer kept informed of the progress and result of their application?

    Applications were assessed within a reasonable timeframe and/or the taxpayer was kept adequately informed of the progress of his/her application, consistent with the procedures and process.

    Review observations are as follows:

    • The ATO has the following procedures in place to ensure that the taxpayer is kept informed of the progress and result of their application.
      • All applications for release are received by the ATO. The ATO subsequently confirms receipt with the taxpayer through written acknowledgement, verbal communication or delivery of an SMS message.
      • Where relevant, the ATO contacts the taxpayer to discuss their personal circumstances, in order to assist in the decision making process.
      • Once a decision is made, the ATO advises the taxpayer verbally and in writing of the outcome including detailing the reason for the decision and advising of the option of appealing the decision in cases where the release is refused.
      • In April 2009 the ATO issued a directive to officers responsible for assessing release cases that established a 7 day timeframe for acknowledging receipt of release applications. The directive also confirmed the existing requirement that applications be assessed within 56 days of receipt or as otherwise discussed with the taxpayer. These timeframes were used as the basis for assessing whether the taxpayer was kept informed of the progress and result of their application, noting that where decision notification was delayed marginally into the 57–63 day period this was also considered acceptable.
      • In November 2015 the ATO issued a directive to officers responsible for assessing release cases that phone contact is required with all taxpayers is required before the decision letter issues to verbally outline the reasons for the decision which are to be reflected in the decision letter to the taxpayer. In addition, for cases where the decision to refuse release is reached, officers are to explain the alternate collection strategies as a solution to the taxpayers debt situation.
       
    • In October 2016 a ‘Progress of Application’ client contact based initiative commenced to improve the taxpayer experience. This evolved into two main areas of focus.
      • Strategy one – cases on hand that are unallocated and nearing 56 days in the office. The intent of this is to proactively contact, monitor and identify trends with possible solutions for release clients that have an active application for release that is yet to be allocated and in the office for 56 days. In line with our current practice of sending an SMS regarding processing delays, taxpayers are contacted by phone and verbally advised of the status of their application. This allows the opportunity for taxpayers to ask questions and for the ATO to assess if the case needs to be escalated as a priority.
      • Strategy two – taxpayers with outstanding returns. The intent of this is to avoid finalising applications with no decision due to outstanding returns; as lodgement may result in either the generation of further debt that will need to be incorporated into the release process or may result in a credit that will offset and reduce the debt, revealing the current compliance and contribute to the overall release outcome. This strategy is and includes the review of the taxpayer’s financial situation, negotiation for lodgment and implementation of alternate solutions.
       
      Last modified: 12 Oct 2017QC 53506