6. Settlement decision
The settlement decision should be seen to be an appropriate application of the Code of settlement principles on the facts and circumstances of the matters in dispute. The decision should be documented and evidenced so that it would satisfy an objective review.
Settlements can only be approved by an ATO officer who has the delegation or authorisation to conclude settlements. All Senior Executive Service officers (SES) have the delegation to settle taxation and superannuation disputes. In some areas other ATO officers are authorised to make a settlement decision.
In some ATO business areas, settlement panels provide advice to ATO officers on reasonable parameters for settlement negotiations and decisions.
For cases where external counsel has been engaged it is expected that the advice of counsel would be obtained on the merits of the Commissioner’s position and the reasonableness of the proposed settlement.
Example 6.1 – Advice of external counsel
The ATO had not been able to resolve a tax dispute which the taxpayer appealed to the Federal Court. Evidence filed by the taxpayer in some aspects strengthens the ATO’s case and in other aspects casts doubt as to whether the ATO’s position is tenable. Following discussions between the ATO’s external counsel and that of the taxpayer, the ATO’s counsel has advised that there is scope to settle the matter. The final decision to accept or reject a settlement offer is that of the responsible ATO SES officer who will give due consideration to the advice of the ATO’s counsel.
Example 6.2 – Settlement panel
A taxpayer has made a settlement offer to the ATO audit officer. The proposal has been taken to an ATO settlement panel for consideration. The panel does not agree that the settlement amount is appropriate and gives the audit officer parameters for which a settlement could be agreed to. The officer is authorised to make a settlement decision within those parameters to achieve the settlement.
Example 6.3 – Authorised officer
In the course of conciliation the AAT member has recommended that the parties consider a settlement. The ATO officer in charge of the case (Executive Level 1) is authorised to negotiate a settlement to a certain amount*. The ATO officer has commenced negotiation with the taxpayer representative but to achieve a settlement the amount agreed to would exceed their authorisation. The ATO officer has contacted the authorised Executive Level 2 officer by phone to seek their approval to settle at a higher amount. The EL2 officer will be the decision maker in this case.
* maximum amount of tax (including interest and penalties) that can be remitted
End of example