The most commonly used assisted ADR processes in tax and superannuation matters are mediation, neutral evaluation and conciliation.
Mediation is the most frequently used ADR process in the Federal Court - since 1 July 2008, 57 matters were referred for mediation, 36 (63%) of which were fully resolved before hearing.
Since 1 July 2008, there have been 289 AAT cases that used ADR processes, with 91 (31%) resolved in full and 43 (15%) resolved in part. In cases that are not resolved prior to hearing, we find that ADR is often useful in narrowing the issues for a hearing. Conciliation is being used in about 70% of tax and superannuation matters in the AAT. Parties find conciliation is a very effective process because a conciliator is able to offer an opinion which is often persuasive as to the ultimate outcome if the matter goes to hearing.
Where conciliation is not appropriate at the AAT, our preference is for mediation over neutral evaluation because of the lower costs involved for both parties.
Arbitration is not a viable alternative because it does not create a binding precedent, and would amount to the ATO compromising a legal principle. It is also generally a more protracted and expensive ADR approach for taxpayers and the ATO.
The report by the Inspector-General of Taxation on the ATO's use of early and alternative dispute resolution was released by the Assistant Treasurer on 31 July 2012. In releasing the report, the Assistant Treasurer noted that the ATO has already embarked on a significant program of work to encourage the use of ADR5. The Inspector-General also noted in the report that "at a high level, the ATO is committed to engaging with taxpayers to resolve disputes earlier. I have noted some examples in which the ATO's early engagement and appropriate use of ADR has assisted to resolve matters in dispute either wholly or partly without the need for litigation''6. The ATO agreed with 20 of the 22 recommendations in the report, either in full, principle or part. 1 was considered a matter for Government, while the other we disagreed with.