Acting in good faith means parties must cooperate in a reasonable way to achieve settlement. In some instances this would require a party to disclose material information to another which, in the absence of a good faith obligation, it would not be required to do.
In addition the strict secrecy requirements of taxation and superannuation laws mean the ATO will not disclose the terms of any settlement agreement to third parties, unless authorised by law or by the taxpayer.
Actions by ATO officers will be consistent with the APS Code of Conduct and will ensure the application of the guidance and mutual obligations in the Taxpayers’ Charter.
Example 7.1 – Acting in good faith
A settlement negotiation has stalled with some distance still between the position of the ATO and the taxpayer. The ATO negotiators need to explain they need to amend relevant assessments and issue penalty notices. To avoid the perception that they are threatening the taxpayers the ATO officers ensure from the outset that the taxpayer is aware of the timeframes they must meet.
Example 7.2 – Acting in good faith
Prior to entering into settlement negotiations, the ATO had referred the matter for consideration of potential prosecution. The ATO officer makes the taxpayer aware of this during the negotiations. The ATO negotiators become aware that prosecution will not proceed. The taxpayer is informed of this decision.
Example 7.3 – Acting in good faith
The ATO is funding a test case on a particular issue. A company with the same issue wishes to settle their dispute so that they can proceed to sell the business. It becomes obvious during settlement negotiations that the company is unaware that there is a test case which may have application to their matter. The company is likely to be sold prior to the resolution of the test case. The ATO officer includes a mechanism in the settlement deed to amend the taxpayer’s assessment if the court finds against the ATO’s position.
End of example