Australia

Details

  • Service: Tax, Corporate Tax, Dispute Resolution
  • Type: Regulatory update
  • Date: 12/08/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Catherine Dean

Catherine Dean
Director, Corporate Tax

+61 2 9346 6125

cadean@kpmg.com.au

Income tax assessments: Object or amend? 

By Catherine Dean, Corporate Tax Specialist

A question that often arises is whether a taxpayer should amend or object against an income tax assessment where they become aware of an error or omission in their income tax return.

Broadly, the answer depends on a number of factors, including the nature of the error or omission, the tax position of the taxpayer, time limits and the level of certainty preferred by a taxpayer.

 

Where an error gives rise to an increase in tax payable, it is important to highlight that a voluntary disclosure by the taxpayer prior to the commencement of a review by the Australian Taxation Office (ATO) will reduce penalties that may otherwise be applied by the Commissioner.

 

Where a taxpayer is seeking to reduce their tax liability, the following considerations should be borne in mind.

 

An amendment is an informal avenue of review and should be used to correct a mistake or omission where there is no dispute about the facts or the law. In contrast, where a taxpayer wants certainty, an objection is a formal request for the Commissioner to consider an issue, which attracts appeal rights either to the Administrative Appeals Tribunal or Federal Court. An objection against an assessment may also be an alternative to a private binding ruling application.

 

It is important to determine the tax position of the taxpayer to confirm they have a right to object against an income tax assessment. Where a taxpayer has no taxable income or no tax is payable, no objection rights may exist unless the taxpayer is seeking an increase in their tax liability. However, where for example a taxpayer is in a tax loss position, they may lodge an objection in a subsequent year where tax was payable and those losses are recouped.

 

Strict time limits apply to amendment applications lodged by taxpayers and whilst similar time limits apply for objections, the Commissioner does have a discretion to allow objections lodged out of time.

 

Advice should be sought before seeking to either amend or object to determine which avenue is most appropriate for your situation.

 

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