Australia

Details

  • Service: Tax, Corporate Tax
  • Type: Regulatory update
  • Date: 18/10/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Trevor Pascall

Trevor Pascall
Partner, Corporate Tax

+61 7 3233 3251

tpascall@kpmg.com.au

Victim of ATO defective administration? 

by Trevor Pascall, Corporate Tax Specialist

The Australian Taxation Office (ATO) has very wide ranging and invasive powers, with many taxpayers feeling threatened and/or hard done by when they encounter the full force of the ATO in a risk review or audit. The ATO approach will often appear heavy-handed and unreasonable where a disagreement on a tax treatment arises. Genuine disputes will, and do, occur without any inappropriate actions on the part of the ATO.

An issue that arises is whether the ATO is acting appropriately within its powers and guidelines or whether there has been a stepping over the line into defective administration.

 

Where a financial loss has been suffered by a taxpayer directly as a result of defective administration by the ATO, an application for compensation may be lodged under the Compensation for Detriment caused by Defective Administration (the CDDA Scheme).

 

Defective administration is defined for the purposes of the CDDA Scheme to be:

 

  • a specific and unreasonable lapse in complying with existing administrative procedures
  • an unreasonable failure to institute appropriate administrative procedures
  • an unreasonable failure to give to (or for) an applicant, the proper advice that was within the official’s power and knowledge to give (or reasonably capable of being obtained by the official to give)
  • giving advice to (or for) an applicant that was, in all the circumstances, incorrect or ambiguous.

 

As an example, where the ATO officers blatantly disregard a critical fact despite conclusive evidence of its existence being provided and, as a result, the ATO officers reach a conclusion that was not reasonably available to them, this will constitute 'defective administration'. Any detriment suffered directly as a result of the defective administration may be claimable under the CDDA Scheme.

 

Often there is a very fine line between what is within the ATO’s powers and guidelines and what constitutes defective administration. And even if there is defective administration, not all financial losses are compensable. We can assist in evaluating your situation.

 

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