Dispute resolution is an inclusive term for all processes where parties attempt to resolve the issues between them, and includes:
- negotiating with another party directly
- asking a court or tribunal to make a decision.
For more detailed information about ADR, you can read Your Guide to Dispute Resolution (PDF 357KB)This link will download a file, produced in 2012 by the National Alternative Dispute Resolution Advisory Council (NADRAC).
ADR is an inclusive term for all processes, other than judicial or tribunal determination, in which an impartial person assists those in dispute to resolve or narrow the issues between them. Examples include:
- mediation and in-house facilitation
- early neutral evaluation.
ADR processes have the following features:
- In facilitative processes an ADR practitioner assists the parties to identify the disputed issues, develop options, consider alternatives and endeavour to reach an agreement about some issues or the whole of the dispute.
- In advisory processes an ADR practitioner considers and appraises the dispute and provides advice on some or all of the facts of the dispute, the law, and possible or desirable outcomes.
- In determinative processes an ADR practitioner evaluates the dispute and makes a determination. Determinative processes, such as arbitration, are not generally appropriate for ATO disputes and, accordingly, are not addressed further.
- In blended dispute resolution processes, the ADR practitioner plays multiple roles – for example, in conciliation and conferencing, the ADR practitioner may facilitate discussions as well as provide advice on the merits of the dispute.
Mediation is a process where the participants negotiate with the assistance of an ADR practitioner, who helps the parties identify disputed issues, develop options, consider alternatives and attempt to reach an agreement.
Mediators do not normally give advice, unless the parties have requested an advisory/evaluative mediation or conciliation.
Mediation is usually voluntary, but can be ordered by a court or tribunal. Where mediation is voluntary, the parties usually split any costs.
Example of mediation:
The ATO issues a position paper to a taxpayer company forecasting amended assessments are to be issued, raising additional activity statement liability and administrative penalty. The additional activity statement liability is based on a reconciliation of stock purchases and sales documents supplied to the ATO auditor by the company.
Upon receipt of the position paper, the company’s tax agent writes to the ATO and advises that the company disagrees with the position paper and requests the parties meet to discuss the methodology for the reconciliation. Because the relationship between the representatives of the company and the ATO auditor has broken down, mediation is suggested. An ex-judge is engaged to act as mediator in the dispute.
At mediation, the mediator guides the parties in their discussions and ensures both parties have their say. The ATO auditor explains the methodology adopted for the stock reconciliation. The company agrees with the methodology adopted, but raises issues in relation to discrepancies in the reconciliation. Following discussion and review of the reconciliation, the parties agree that the company has not provided the ATO with all relevant documentation. The company then provides further documentation.
Following mediation the ATO auditor revises the reconciliation resulting in a reduction of the additional activity statement liability. The administrative penalty is also reduced. Amended assessments are issued reflecting the reduced liability.
The company does not lodge an objection to the amended assessments and pays the liability by the due date.End of example
In-house facilitation is the ATO's version of mediation where a trained independent ATO officer assists participants to negotiate their dispute. The in-house facilitator helps the parties identify disputed issues, develop options, consider alternatives, and attempt to reach an agreement.
The facilitator will not establish facts, take sides, give advice, make a decision or decide who is ‘right or wrong’. The facilitator merely guides the parties through the process and will assist them to ensure there are open lines of clear communication, and messages are correctly received.
There is no cost associated with in-house facilitation.
Example of facilitation:
A company undertaking research and development (R&D) activities makes a significant claim for the R&D incentive tax offset. Given the refund involved is a significant amount of money, it has been held by the ATO pending investigation. The taxpayer is adamant that it is entitled to the refund and is frustrated because the refund delay is impacting the cash flow of the business. Because of time pressures, the auditor’s manager suggests having a facilitation between the ATO, the director of the company, and its tax agent.
A trained ATO officer who has had no previous involvement in the dispute is allocated to facilitate the dispute. During the four-hour facilitation the ATO explains its particular concerns and its view of the relevant R&D law, and the company provides additional information to the ATO. It becomes apparent the company is entitled to only half of the refund.
The facilitation results in the ATO officers providing an undertaking to immediately process the refund that the company is entitled to; the company and the tax agent having a better understanding of the law and its R&D compliance obligations; and the tax officers complete their investigation in a shorter period of time.End of example
Neutral evaluation (also called Early Neutral Evaluation or ENE) is a process where the participants to a dispute present their arguments to an ADR practitioner who gives advice on the appropriate manner of resolving the dispute. In tax and super disputes the ADR practitioner usually has substantial experience in tax law and gives advice about the decision a court or tribunal may make if the dispute proceeds to litigation. It is up to each party if they accept the advice of the evaluator and how they use that information.
Neutral evaluation can occur at any stage of a dispute, but is often of most benefit before legal proceedings have commenced.
Example of neutral evaluation:
An objection is lodged by a representative for a taxpayer. In the course of considering the objection, and based on significant discussions with the ATO, the tax representative requests the parties have a neutral evaluation before the objection decision is issued.
The taxpayer and his tax representative, together with the objections officer and his director, participate in the neutral evaluation. The ADR practitioner gives advice to the parties about the likely outcome if the matter were to proceed to the Administrative Appeals Tribunal (AAT) or the Federal Court. On the basis of the advice, the parties decide that neither is going to be completely successful in legal proceedings – they also recognise the cost and time involved if the dispute continues. As a result, the parties negotiate an agreement based on the advice received.End of example
Conciliation is a process where the participants negotiate with the assistance of an ADR practitioner who helps the parties identify the issues in dispute, develop options, consider alternatives, and attempt to reach an agreement. The conciliator often has qualifications in the area of the dispute.
Unlike in facilitative processes, a conciliator may give expert advice to the parties on possible options for resolving the dispute and actively encourage the participants to reach an agreement.
Conciliation is often used by the Administrative Appeals Tribunal (AAT) in tax and super disputes.
Example of conciliation:
A taxpayer lodges an appeal in the AAT against an objection that was disallowed by the ATO over a deduction he claimed in his income tax return. Early in the proceedings, the taxpayer and the ATO agree to a conciliation to try to resolve the dispute.
During the conciliation the ATO officer explains his views on the issue that he needs additional information to assist him to make a decision and this information has not been received, despite repeated requests. The taxpayer said she did not understand why that information could possibly be relevant and would not know where to find the information. The conciliator advises the taxpayer that the information is very important and if it can be provided in some form the dispute may resolve. The taxpayer then explains she may be able to get the information verified by a third party.
Ultimately, the taxpayer provides the information and the dispute is resolved, saving both parties valuable time and money.End of example
Courts and tribunals usually offer ADR as an alternative method of resolving disputes. Tax and super disputes are usually heard by either the Administrative Appeals Tribunal (AAT) or the Federal Court of Australia.
The AAT offers a full suite of ADR servicesExternal Link, including:
- conferencingExternal Link
- mediation process model (PDF, 136KB)This link will download a file
- neutral evaluation process model (PDF, 127KB)This link will download a file
- case appraisal process model (PDF, 127KB)This link will download a file
- conciliationExternal Link
The Federal Court also offers various ADR servicesExternal Link, including:
- ATO Disputes Policy
- Code of Settlement Practice
- Law Administration Practice Statement PS LA 2013/3 Alternative Dispute Resolution (ADR) in ATO disputes
- Law Administration Practice Statement PS LA 2009/9 Conduct of Tax Office Litigation and Engagement of Legal Services Branch
- Taxpayers' Charter
- Access to Justice websiteExternal Link
- Administrative Appeals TribunalExternal Link
- Attorney-General's DepartmentExternal Link
- Civil Disputes Resolution Act 2011External Link
- Commonwealth OmbudsmanExternal Link
- Federal Court of AustraliaExternal Link
- The Institute of Arbitrators and Mediators AustraliaExternal Link
- Leadr (Association of Dispute Resolvers)External Link
- Legal Services Directions 2005External Link
- Mediator Standards BoardExternal Link