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Applying for compensation

Any individual or organisation can apply to us for compensation. Find out how to apply and how we assess claims.

Last updated 9 April 2024

You can apply for compensation from us if:

  • our actions give rise to a legal liability (for example, negligence)
  • you have financial losses caused by our defective administration.

Claims for defective administration are covered by the Compensation for Detriment caused by Defective Administration Scheme (CDDA Scheme).

Any individual, company or other organisation can submit an application for compensation. You can do this yourself or through a third party, such as a lawyer or registered tax professional.

Read the information in this document to understand the process and what you can claim for.

To apply:

How we assess claims

Officers in our General Counsel assess compensation claims. Assessors are independent of the ATO area that dealt with your matter before.

We assess claims for compensation in 2 ways, either:

  • because there may be a legal liability (for example, negligence)
  • under the Compensation for Detriment caused by Defective Administration Scheme (CDDA Scheme).

We decide claims on the basis of legal liability in line with legal principle and practice. Any settlement must be consistent with our obligations under Appendix C to the Legal Services Directions 2017External Link.

Claims for financial losses caused by our defective administration are covered by the CDDA Scheme. We decide CDDA Scheme claims in line with the Department of Finance's Resource Management Guide 409External Link.

We aim to make the claim process simple so you can access help when you need it.

If compensation of either of these types is not appropriate, you may be eligible for an act of grace payment. We do not administer act of grace payments. They are administered by The Department of Finance. You can find informationExternal Link on their website.

What you can claim for

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.

Examples

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

After you make a claim

Claim decision process

We aim to send you written acknowledgment of your compensation claim within 7 business days of receiving it. Where possible we will give you the name and contact details of the person managing your claim.

For straightforward claims, once you give us all the necessary information to support your claim, we aim to give you our decision within 56 days.

For more complex claims, we aim to give you our preliminary view within 56 days. You can then comment on our view.

We may take longer to investigate and consider some claims with complicated facts or that extend over long periods of time. In these cases, we will contact you about an extended date for our decision.

If you did not give us all the information to make a decision, we will contact you to discuss what information you may be able to provide.

Any other dispute resolution processes you are involved in need to be resolved before we will consider your claim. This includes:

  • court or tribunal action
  • an active complaint with the Inspector-General of Taxation.

Receiving payment

If your claim is successful, we will transfer the payment electronically into your nominated bank account.

If you're unsure whether the payment is taxable, you can contact us or a registered tax professional.

Reviewing our decision

Internal review

There is no automatic right of administrative review of decisions under the CDDA Scheme. Reflecting the discretionary nature of the Scheme, it is a matter for each agency whether to offer the opportunity to review decisions.

We offer internal review if you can provide new and relevant information or contentions to support your claim. Information about internal review is on your compensation decision letter, or you can phone 1800 005 172.

Inspector-General of Taxation

The Inspector-General of Taxation can investigate most complaints related to tax administration. This includes the handling of compensation claims. The Inspector-General has no power to overturn or vary our decision but may make recommendations to us about how we handled the claim.

You can contact them:

External review

You can contact the original decision maker and request that your decision is reviewed by our external review panel. The panel consists of independent reviewers that are highly respected members of the legal community. If your decision is reviewed, the panel will provide a recommendation on the outcome of your decision to us. This service is free of charge to you.

We may also suggest that a matter is externally reviewed in appropriate cases without a request being made.

Cases suitable for external review can involve:

  • complex factual issues
  • long-standing or historical disputes
  • disputes about claims of significant amounts.

Once the request is made, we'll advise if your decision will be referred for external review as soon as possible.

If you would like your decision to be considered for external review:

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

Further help

Small business compensation assistance

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) can help small businesses seek compensation from the ATO for defective administration.

To contact the ASBFEO:

More information

For more information about applying for compensation from us:

Our approach to the CDDA Scheme

The ATO's approach to administering the Compensation for Detriment caused by Defective Administration (CDDA) Scheme supports our ongoing commitment to improve our service culture and to increase the trust and confidence in our administration of the tax and super systems.

We do this by ensuring client experience and interactions are well designed, tailored and transparent, in line with our Towards 2024 aspirations.

Our approach to the CDDA Scheme is supported by the ATO Charter. The Charter:

  • outlines our commitment to a relationship with taxpayers based on mutual trust and respect
  • sets out taxpayers’ rights and obligations when dealing with us
  • explains what taxpayers can do if they are not satisfied with our decisions or actions.

We want to ensure that it is easy for all taxpayers, including small businesses and individuals, to access support and assistance when it's needed. We believe the compensation process should be straightforward, fair and consistent and we're committed to making it simpler for all taxpayers to understand and access the CDDA Scheme.

What you can expect from us

We will:

  • treat you with courtesy, consideration and respect throughout the process
  • provide you the opportunity to present your views and take your personal circumstances into account
  • ensure your claim is considered by someone in an independent area of the ATO
  • have any review conducted by someone who has not previously dealt with your matter
  • acknowledge when the ATO has done the wrong thing and pay compensation that we consider appropriate and fair
  • ensure simple claims are dealt with efficiently and that more complex, significant or sensitive claims are managed appropriately, including an escalation path to independent senior officers of the ATO or to an independent reviewer external to the ATO
  • communicate with you in a way that explains our decisions and is easy to understand
  • in the small number of claims that result in a dispute, provide you with a clear path through the review process.

In return, we expect that you will:

  • give us all the relevant facts and circumstances to enable us to consider your claim
  • answer questions accurately, completely and honestly
  • be cooperative and respectful in your dealings with us.

 

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