What you can claim for
The following information details what you can claim for and provides some practical examples.
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Losses we can consider
We can consider compensating you:
- for financial losses caused by the ATO's defective administration
- where our actions give rise to a legal liability.
These losses include:
- professional fees you incurred to resolve a problem that we caused
- interest for unreasonable delays in providing you with a payment, if no statutory interest can be paid
- bank or other administrative fees you incurred because of our defective administration.
Losses we cannot consider
Generally, under the CDDA Scheme or because of legal liability, we cannot compensate for the following types of losses:
- inconvenience and your personal time spent resolving an issue
- stress, anxiety or hurt that is unrelated to a personal injury which is being compensated under the CDDA Scheme
- interest for delays in receiving payments from the ATO where statutory interest is payable
- costs of complying with the tax system, including costs associated with audits, objections and appeals. This is even if we find you complied with your obligations or change our decision in your favour
- costs of applying for compensation or communicating with us about your claim
- taxation or other Commonwealth liabilities where you have substantive review rights that you have not pursued.
Compensation payments cannot offset tax debts that you owe. See information to help you manage your debt at Help with paying.
Example 1 – Failure to provide advice regarding credit card fees
Mr Jones, a taxpayer, calls us to discuss his debt. He agrees with our explanation and pays his debt by credit card. The ATO officer processes the payment. However, they don't tell Mr Jones that he will be charged a processing fee for paying by credit card.
Our procedures say that before confirming the payment, we must tell the taxpayer that credit card payment fees apply and how much the fee will be.
In this case, the ATO officer failed to follow procedures because they didn't tell Mr Jones about the credit card fee. This failure was defective administration. Mr Jones received the cost of the credit card fee as compensation.
End of example
Example 2 – Refund delay
Ms Wang, a taxpayer, claims compensation for a delay in processing her tax return refund. She claims the amount of interest she missed out on because her tax return was not processed within the stated processing period.
Our review found the delay was due to a combination of the volume of returns being processed at the time and Ms Wang providing conflicting financial institution details when lodging her return. After confirming the financial institution details, we updated the payment method for the refund. We did not tell Ms Wang about this change to the payment method, and she only discovered it later. She contacted us again to reinstate the previous payment method.
The compensation decision maker found there were unreasonable lapses in our compliance with existing administrative procedures. These lapses were:
- delay in actioning the mistake with the financial institution details on the taxpayer’s return. This resulted in a delay in the issuing of the notice of assessment (and related refund)
- failing to tell the taxpayer about the change in refund method. This resulted in the taxpayer having to request reinstatement of the original method. This led to a further delay in the taxpayer receiving their refund.
The compensation decision maker considered it unlikely that, if viewed separately, our individual actions in this case would be defective administration. However, when looking at all the circumstances together, it was unreasonable. Of particular relevance is that providing a timely tax refund is a core function of the ATO.
End of example
Example 3 – Audit delay
In late 2018 Mr Smith, a taxpayer, was audited by the ATO. Mr Smith had multiple entities and complex affairs. We told him we identified several risks that needed to be addressed through an audit. Mr Smith was represented by a tax agent during the audit period.
During the audit, there were a significant number of interactions between Mr Smith, his representatives, third parties, and us. This included several requests for information.
Mr Smith and his representatives asked for additional time to comply with the requests for information on many occasions. We made follow-up requests several times when the information provided was incomplete.
In early 2020, we issued a position paper to Mr Smith. We told him we planned to amend the income tax assessments of a number of related entities. Mr Smith didn't agree with the findings and provided us with information to explain why. He also said we had failed to properly consider information he had already provided when issuing the position paper.
Our audit concluded in mid-2020. After the response to the position paper was received, no amendments were made to the tax assessments of the taxpayer’s entities.
Mr Smith made a compensation claim on the basis that the time taken to complete the audit was excessive. It resulted in additional costs to pay for professional representation.
Losses the decision maker determined would not be covered as there was not defective administration
On reviewing the claim, the compensation decision maker found that while the audit did take longer than usual, it was not considered defective administration. This was due to the complexity of Mr Smith's affairs and that delays in receiving information contributed to the overall time taken to complete the audit.
Losses the decision maker agreed would be covered
However, the compensation decision maker considered that there was defective administration in one aspect of the audit. The ATO auditor had not considered information already in their possession before preparing and issuing the position paper to the taxpayer. Had the auditor considered this information, it's unlikely they would have initially found that tax assessments needed to be amended.
We paid compensation to Mr Smith for the additional professional costs associated with responding to the position paper.
End of example
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Last modified: 23 Dec 2022QC 17735