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  • Resolving disputes

    We are improving client satisfaction with the process, service and fairness in managing disputes, including independent reviews.

    Given the large scale of the ATO's operations and interactions with taxpayers, only a very small proportion of ATO decisions are disputed. Disputes include formal objections and litigation cases.

    We now better understand the drivers of taxpayers’ perceptions of fairness in disputes. This research has identified possible improvements in our processes as well as reshaping how we resolve disputes, by shifting to a more client-centred approach.

    In particular, we have adopted an early engagement approach to reduce the time and effort required to get to the heart of issues, resolve disputes and agree on a way forward. This often involves contacting the client by phone and initiating a conversation. It also includes engaging experts earlier in the life of cases to resolve points of disagreement and facilitate settlement of disputes.

    Our performance in managing objections by GST taxpayers is measured by the number and age of cases resolved and on hand and, just as importantly, by community perception of how fair we are in dealing with these cases.

    Figure 14: GST disputes in 2015–16

    Figure 14 – GST disputes in 2015–16 This bubble diagram shows that of the 14,581 adjustments arising from an audit, 1,150 (or 7.8%) objections were received, 67 (or 0.5%) cases were referred to courts or tribunals and 18 (or 0.1%) cases proceeded to decision.

    Objections

    We received 1,150 objections in 2015–16 and completed 1,355. The higher finalisation rate was due to the completion of a number of objections lodged in previous years relating to refund claims from motor vehicle dealers, referred to as Motor Vehicle Incentive payments.

    Our perceptions of fairness surveys showed a steady trend of increased satisfaction in our resolution of objections, around the 60% benchmark. This measure acknowledges that taxpayer perceptions of how they have been treated directly affects their compliance. Satisfaction has increased over the last 12 months, regardless of the outcome. This reflects our increased client focus, including better communication and interaction, understanding client needs, and tailoring our responses more appropriately to resolve the dispute. Please refer to Schedule C for further information.

    We received 5% fewer GST-related objection cases this year – 1,150 compared to 1,214 received last year.

    As discussed in the case study, self-assessment for indirect taxes came into effect from 1 July 2012. Under this system, a four-year period of review applies once the Commissioner makes an assessment. We have noticed some businesses are trying to claim GST credits outside the time limit. Notifying us within the four-year limit, to effectively ‘stop the clock’, is no longer an option.

    Settlements

    We may settle a dispute where we consider it consistent with good management of the tax system. In doing this, we balance our responsibility to collect taxes with the need to administer the tax system sensibly, having regard to relevant factors such as the relative strength of the positions of both parties, the cost versus the benefits of continuing the dispute, and the impact on future compliance for the particular taxpayer and the broader community.

    We settled 49 cases in 2015–16.

    Figure 15: Stage at which settlement occurred during 2015–16

    Figure 15 – Stage at which settlement occurred during 2015–16 Of the 49 cases settled during 2015–16, 10 were settled at pre-audit stage, 16 cases at audit stage, 14 cases at objection, and 9 cases at the Administrative Appeals Tribunal.

    GST objections total outcomes

    Figure 16: GST objections – received and finalised

    Figure 16 – GST objections – received and finalised graph The data that built this graph, showing the GST objections received and finalised over the past five financial years is provided in Table 15 below.

    Table 15: GST objections – received and finalised

    Objections

    Received

    Finalised

    2015–16

    1,150

    1,355

    2014–15

    1,214

    1,381

    2013–14

    1,353

    1,388

    2012–13

    1,893

    2,375

    2011–12

    2,885

    2,655

    Figure 17: GST objections received – non-compliant behaviour type

    Figure 17 – GST objections received by non-compliant behaviour type The data that built this diagram, showing GST objections received by non-compliant behaviour type over the past two financial years, is provided in Table 16 below.

    Table 16: GST objections received – non-compliant behaviour type

    Type

    2014–15 Cases

    2014–15 %

    2015–16 Cases

    2015–16 %

    Refund integrity (pre issue)

    409

    34

    270

    23

    Refund integrity (post issue)

    204

    17

    115

    10

    Cash economy

    246

    20

    292

    26

    Property

    140

    12

    102

    9

    Serious evasion

    18

    1

    38

    3

    Other

    197

    16

    333

    29

    Total

    1,214

    100

    1,150

    100

    Figure 18: GST finalised objections – market

    Figure 18 – GST finalised objections – market segment diagram The data that built this diagram, showing the GST finalised objections by market segment is in Table 17 below.

    Table 17: GST objections finalised – market

    Market

    2013–14

    2014–15

    2015–16

    Micro

    1,159

    1,070

    913

    Small to medium enterprises

    192

    256

    295

    Large

    10

    31

    92

    Government

    18

    6

    2

    Not-for-profit

    6

    15

    11

    Unknown

    3

    3

    42

    Total

    1,388

    1,381

    1,355

    Figure 19: GST finalised objections – outcomes

    Figure 19 - GST finalised objections – outcomes diagram The data that built this diagram, showing GST finalised objections - outcomes over the past three financial years is provided in Table 18 below.

    Table 18: GST objections finalised – outcomes

    Outcomes

    2013–14 Cases

    2013–14 %

    2014–15 Cases

    2014–15 %

    2015–16 Cases

    2015–16 %

    Allowed in full

    337

    24

    364

    26

    317

    23

    Allowed in part

    373

    27

    449

    33

    479

    35

    Disallowed

    331

    24

    308

    22

    304

    23

    Withdrawn settled

    4

    <1

    20

    1

    11

    1

    Invalid/Withdrawn

    343

    25

    240

    18

    244

    18

    Total

    1,388

    100

    1,381

    100

    1,355

    100

    Note:

    • Around half of all cases where the Commissioner conceded ‘in part’ or ‘in full’, were due to provision of further information by the client. Incomplete records are still a major driver of unfavourable audit decisions.

    Figure 20: GST objections – amount allowed

    Figure 20 – Original audit liabilities allowed diagram  The data that built this diagram, showing the GST objections amount allowed as a percentage for both 2014–15(16%) and 2015–16(50%) – is taken from the figures provided in Table 19 below.

    Table 19: GST objections – amounts in dispute

    Objection type

    2013–14 Tax ($ million)

    2013–14 Penalty ($ million)

    2014–15 Tax ($ million)

    2014–15 Penalty ($ million)

    2015–16 Tax ($ million)

    2015–16 Penalty ($ million)

    Original audit liabilities

    163

    77

    333

    110

    114

    53

    Amount in dispute

    137

    66

    299

    104

    363

    51

    Amount allowed

    49

    27

    54

    12

    58

    16

    Net audit liabilities

    114

    51

    279

    98

    57

    37

    Amount allowed %

    30%

    35%

    16%

    11%

    50%

    30%

      Last modified: 20 Apr 2017QC 51810