9.1 This chapter addresses the ATO's issuance of position papers in an audit context. It considers both the process by which a position paper is developed and also the form and content of the position paper itself.

9.2 The position paper process review considers, amongst other things, the level of engagement and exchange expected between the ATO and taxpayers in the presentation of ATO views or positions and related taxpayer responses. The details of the position paper's form, content and approach are explored to consider opportunities for improvement for both the taxpayer and ATO.

9.3 Taxpayer concerns raised in submissions and consultations regarding the position paper process are also canvassed. Briefly, issues raised included the length of time taken for the ATO to issue a position paper, the timeframe for taxpayers to respond and the quality of position papers.

9.4 The chapter makes recommendations to improve the position paper process by further promoting transparency, engagement and dialogue and also the quality of position papers form and content. These combined recommendations, if implemented effectively, should assist in improving the ATO's end-to-end management of audit disputes along with taxpayer understanding and satisfaction in that process.



9.5 The position paper process is an important aspect of fair decision making in ATO audits of taxpayers. It is one of the ways in which the ATO explains and communicates its position for particular matters in dispute to taxpayers. More specifically the position paper provides taxpayers with:

  • information about the ATO's view of the facts and the law applicable to the matter;
  • an opportunity prior to the audit's finalisation to provide further facts and legal argument that may be relevant to formulation of the ATO's position; and
  • an opportunity to discuss contentious issues so as to better understand the merits of each other's position in reaching agreement about how the matter may be finalised.1

9.6 The Compliance Manual requires that position papers be transparent in process and that taxpayers have an opportunity to respond to them. If a taxpayer responds to a position paper then this should be taken into account in deciding the final ATO view of the position.2

9.7 A position paper is not a 'decision', but rather the presentation of the ATO's preliminary view of the facts and the law applying to them. The ATO's position paper procedures state that:

... the ATO provides a position paper on a co-operative basis to provide information relevant to decisions that it is about to make. The position paper represents the ATO's considered view after consultation as appropriate with technical specialists and forums, Tax Counsel Network, external legal advisers and the taxpayer. As such, it demonstrates that the ATO has identified appropriate issues and has given the taxpayer opportunity to discuss and explain any issue before the ATO makes any adjustments.3

Process and content

9.8 The Large Business & International (LB&I) Compliance Manual sets out a number of key points that auditors should consider in relation to position papers:

  • it is advisable to start to develop the position paper as early as possible in the audit;
  • if it will assist to obtain further information, clarify the facts or resolve the issues then the auditor may provide a draft position paper to the taxpayer early in the audit and ask for their views;
  • whilst the position paper is a more formal way of setting out the ATO's views on the issues, the auditor should also arrange a conversation with the taxpayer to discuss the contents of the position paper; and
  • the ATO must provide taxpayers with sufficient time to respond to the position paper, which would normally be 28 days, although this will ultimately depend on the complexity and significance of the issues.4

9.9 The Manual also provides that the position paper may contain the following:

  • the material facts and evidence upon which the ATO view is based;
  • the ATO view that is relevant to the audit and the application of the ATO view to the facts; and
  • the taxpayer's view or contentions.5

Engagement with taxpayers

9.10 The LB&I Compliance Manual also sets out a number of mandated steps that must be conducted in the course of determining the ATO position. Two of these steps involve presenting the ATO findings to the taxpayer and managing the position paper process.6

Managing the position paper process

9.11 The Compliance Manual mandates that in managing the development of an ATO position paper a case officer will:

  • present the initial ATO view to the taxpayer;
  • hold an interview (where possible) with the taxpayer to discuss the initial ATO view and give the taxpayer the opportunity to provide feedback;
  • provide the taxpayer with the opportunity to provide written feedback on the initial Tax Office view; and
  • consider the taxpayer's feedback and provide them with a written response.7

9.12 The Manual notes that the above can happen either within the position paper process or separate to it depending on the circumstances of the case. If the case officer has moved directly to a position paper process then the ATO view would most likely be presented to the taxpayer in the form of a draft position paper.8

Dealing with taxpayer responses to position papers

9.13 The position paper procedures provide guidance to case officers on what to do if there are delays in receiving a taxpayer's response to the position paper.9

Table 9.1: Guidance to case officers in dealing with responses to position papers10
Event Action
If case officer receives no response within the date set in the covering letter Contact the taxpayer or their agent to determine why there has not been a response and whether one is coming.
If the taxpayer has not responded by the requested time, and plans to respond to the position paper

Determine whether it is appropriate to grant an extension of time. Consider any relevant business practice and such factors as:

  • complexity of the issue(s);
  • the need for the taxpayer to get a legal opinion or other specialist advice;
  • whether the statutory time limits for making adjustments are getting close to expiry;
  • the taxpayer's position on the compliance model or the co-operative compliance model and their behaviour to date (for example, whether they have provided information and documentation in a timely manner);
  • whether the expectation that the taxpayer will respond is realistic and the taxpayer's response is likely to materially alter the ATO position;
  • the progress the taxpayer has made to date in responding to the position paper; and
  • other special circumstances.

If the case officer agrees to an extension, confirm the new date for a response in writing to the taxpayer.

If the case officer does not agree to an extension, discuss the matter with the Team Leader to determine what course of action to take next.

It is not clear whether or not the client will send a response It may be suitable in some circumstances for the case officer to send a reminder letter advising that if the ATO does not receive a response within 14 days the ATO will finalise its view in accordance with the position paper.

9.14 The position paper procedures also provide instructions to ATO staff on how to deal with taxpayers that respond to position papers with questions or requests for clarification. The procedures state that where a taxpayer's questions are reasonable, then an auditor must ensure that their actions are consistent with the Taxpayers' Charter and provide an appropriate response to the taxpayer's queries. The procedures note that a taxpayer question will be considered reasonable if:

  • it seeks to clarify a fact stated by the ATO in the position paper;
  • if the ATO considers that time spent answering the questions is a reasonable allocation of resources; and
  • the questions are asked in good faith.11

9.15 The position paper procedures state that where further questions from a taxpayer are unreasonable, then it is appropriate for an auditor to refuse to reply to them. The procedures list situations in which taxpayer questions about a position paper are considered unreasonable, and these are:

  • the taxpayer has been uncooperative and obstructive;
  • they pose an unreasonable administrative burden;
  • they are outside of the scope of furnishing responses to the taxpayer to enable them to respond to the position paper;
  • they are in the nature of seeking further and better particulars, as if part of a 'quasi-litigation' process;
  • they are submitted in order to delay the finalisation of the case; or
  • they are frivolous or vexatious.12

9.16 The position paper procedures also note that it is better to provide the taxpayer with only one position paper on the issue. However, it is recognised that in exceptional circumstances an amended paper may be necessary, for example where there are material changes to the ATO position as a result of the taxpayer's response.13

9.17 For quality assurance purposes an auditor is required to provide the position paper to all necessary internal stakeholders (including their team or technical leader) for examination and clearance before sending it out to the taxpayer. The clearance process is about ensuring that the position paper meets all technical and procedural quality standards, including that it:

  • is consistent with the principles of the corporate approach to interpretative work, Taxpayers' Charter, ATO Judgement Model and Compliance Model;
  • is adequately researched and appropriate and relevant information gathered;
  • reviews and and applies appropriate legislation, case law and ATO views and appropriately manages precedential issues and procedural requirements in accordance with relevant ATO practice statements;
  • conformed with any ATO business line instructions concerning escalation; and
  • used appropriate spelling, grammar, layout and tone.14

Submissions and consultations


9.18 A considerable number of stakeholder submissions and consultations with the IGT expressed strong concerns on key aspects of the ATO's position paper process. The ATO were a little surprised by this representation as it seems inconsistent with the Client Feedback Questionnaire results over the last few years. There were also some good examples of ATO improvement in this process that certain taxpayers and advisers had experienced and shared with the IGT — these also tended to be more recent examples.

9.19 A number of taxpayers and advisers commented that position papers were still being issued after little or no contact from the ATO for many months, creating real surprises for them regarding the facts and issues identified as presented by the ATO.

9.20 They also asserted that given the lack of prior engagement, the facts set out in position papers are not agreed or tested prior to the ATO forming a technical view. This means that the ATO's technical specialists are providing views based on incorrect facts in those circumstances. Taxpayers also remarked that by this stage it is often too difficult to change the ATO's view of the facts and evidence.

9.21 By way of example, one taxpayer submitted that it received a position paper where the ATO relied on an external market valuation to support its position where there was no prior opportunity to respond to the methodology or the basis of the valuation. In addition, there was no opportunity for the respective valuers to meet to discuss the differences in methodology and valuations.

9.22 The taxpayers and advisers believed that the efficiency and effectiveness of audits would be greatly improved if there were opportunities to meet with the ATO to discuss the facts, issues and legal basis before the ATO issues a position paper. Taxpayers would also like to see the ATO's technical specialists involved as early as possible in the audit, including in discussions with taxpayers, so as to assist with development of technical arguments contained in position papers and to review taxpayer responses.

9.23 The taxpayers and advisers submitted that, in their experience, the ATO does not adequately consider their responses to position papers. For example, they do not see their views and positions being formally addressed in any revised position paper. Others remarked that there was often no opportunity to meet and discuss the taxpayer's response or be given an explanation as to why their response had been accepted or not. They said that this has contributed to the perception that the ATO has already formed their view on the facts, issues and law and is unwilling to depart from its stated position. Some taxpayers suggested that in their view the ATO does not readily consider a taxpayer's response during the audit stage and so they are left trying to try and escalate the issues during the objection stage.

9.24 The ATO expressed certain views in this context with the IGT. The ATO believes that this may also be a question of misaligned expectations. The ATO suggested that some arguments or views as put by taxpayers will have a potentially more significant bearing on the case than others. The ATO view is that it is not necessary to weigh down a position paper with an extensive analysis of arguments or comments that have no significant impact on the outcome. Discussion at the time when the ATO's final position paper is prepared enables teams to explain their views on what the taxpayer has said and why some matters, if any, have not been given more weight.

9.25 A number of taxpayers and advisers also raised concerns with the considerable time and money they have spent in responding to position papers or information requests but which have not resulted in any discussion or change to the ATO's position paper. Taxpayers referred to instances where position papers were issued shortly after they responded to an information request (in one case less than two weeks), raising doubts about whether the ATO had properly considered the information and documents provided by taxpayers.

9.26 In another case, a taxpayer received a broad information request (with a 28-day response time) which was very shortly followed by the ATO's position paper. The taxpayer said that it was unclear how the ATO could issue a position paper prior to the taxpayer responding to the information request. The taxpayer asserted that if the information was not required by the ATO in its analysis, then it was unclear why the information had been requested and its relevance. The taxpayer indicated that due to the short timeframes in having to respond to both the position paper and information requests, it had to incur considerable costs on external advisers, counsel and lawyers as well as significant internal staff costs.


9.27 A common theme in nearly all submissions was that the ATO did not provide a reasonable opportunity for taxpayers to adequately respond to position papers. A number of taxpayers and advisers asserted that it was rare to obtain a position paper without an accompanying time pressure, with many instances of position papers being issued late in the audit process leading to increasing costs and tension in finalising audits.

9.28 Taxpayers have also complained of unreasonable timeframes to respond to position papers or have a meaningful discussion, especially where there has been little engagement leading up to the provision of the position paper. Some taxpayers have indicated that they have had to respond to a position paper and at the same time deal with a large number of other ATO compliance activities such as risk reviews, other information requests and compliance obligations (for example, business activity statements and various return obligations).

9.29 Some advisers indicated that they had received amended assessments shortly before the expiration of the ATO's two-year timeframe even though they had little time to respond to the position paper or discuss the merits of the competing positions.

9.30 Taxpayers submitted that in a large market audit context it was inappropriate for the ATO to take 12 or more months to prepare and issue a position paper (with often little or no prior engagement around the risk hypothesis, facts and evidence) and then only provide the taxpayer with 28 days to respond. One taxpayer said that they were provided with a period of 28 days to respond to a position paper and told that no extension of time would be granted. This approach caused the taxpayer to incur considerable external fees to respond in such a short timeframe.

9.31 Other taxpayers submitted that it was often not possible, in the short time provided by the ATO, to prepare a detailed response to the position paper, especially where there has been little engagement leading up to the position paper. This was often because such a response would require the taxpayer to undertake further inquiries in order to be able to fully respond.

9.32 Other taxpayers have complained of delays in the ATO issuing a position paper and not meeting milestone dates. On one occasion the ATO initially indicated it would provide the position paper in March 2007 — and on 15 subsequent occasions the ATO has set dates for the delivery of the position paper and on each occasion the ATO has failed to meet its self-imposed deadline.

Quality of position papers

9.33 Taxpayers and advisers observed a significant variation in length and quality of position papers in submission and consultation with the IGT. The good examples exhibited high quality in all aspects while those of lesser-quality were considered to be too long in parts, not clear in analysis or structure and often with incorrect, misstated or omitted facts with no explanation of the relevance of evidence. They believe that this arises because there has been no prior discussion between the ATO and taxpayers about key documents or transactions, leading to uninformed opinions, poor analysis and incorrect conclusions.

9.34 Taxpayers and advisers also strongly submitted that there should be greater guidance on the content of a position paper.

9.35 Taxpayers have raised concerns regarding the purpose of position papers, suggesting that the ATO use them to:

  • present facts and technical arguments in a way that best supports an assessment being issued;
  • omit or marginalise key facts that do not support the ATO's technical position; and
  • ignore or otherwise not provide a fair representation of the taxpayer's technical position.

9.36 In consultations with the IGT, taxpayers and their advisers raised concerns that the ATO tends to rely heavily on the fact that the taxpayer bears the onus of proof. This results in either the taxpayer having to unnecessarily incur significant costs to prove immaterial facts or forcing taxpayers to lodge objections.

IGT observations

9.37 The IGT believes that the position paper is a key part of the ATO's end-to-end dispute resolution process and that the audit process could be enhanced so as to encourage a more cooperative approach to developing and finalising a position paper.

9.38 It is important that the processes leading up to the issuing of a position paper encourages discussion and engagement, especially in relation to the facts and evidence, so as to minimise the perception of surprise relating to the facts and issues identified by the ATO. Greater engagement will also assist in identifying potential issues and points of disagreement earlier and provide taxpayers with an opportunity to discuss and explain any issue before the ATO makes any adjustments.

9.39 Likewise, the content of a position paper must best support any further disputation (objections and litigation). At the end of an audit, taxpayers should have a clear understanding of the issues in dispute, the material facts that are agreed and any that are disputed and the evidence on which the ATO is relying to support its view and amended assessments. This is not only beneficial to the taxpayer but also to an ATO objections officer should the audit go on to dispute. In addition, these practices align with the requirements of the Federal Court Practice Note TAX 1 should the objection decision proceed to litigation.

9.40 The IGT found that often the receipt of a position paper was the first time taxpayers became clearly aware of the ATO's understanding of the facts, evidence and the issues subject to audit. However, by this stage the ATO has devoted considerable time and effort in the conduct of internal workshops, research and in forming an ATO position on the facts and evidence as indentified by them.

9.41 Taxpayers have suggested that the position paper process should be enhanced by requiring the ATO to discuss and clarify the facts before preparing a position paper. Some suggested that this could be achieved by the ATO issuing a separate 'statement of facts' document setting out the ATO's understanding of the facts and the particular transaction. Taxpayers would then be provided with an opportunity to clarify and agree the facts as set out in the document. If the taxpayer disputes the facts, then they should provide the relevant areas of disagreement together with supporting documentation. Taxpayers could be given a reasonable period to respond, which could be extended by negotiation if further documentation is required to support the facts. For more detail on the Statement of Facts issues, reference should be made to Chapter 8 of this report.

9.42 An enhanced consultative approach would save a substantial amount of time on both sides by avoiding the need to develop, or respond to, technical arguments based on an incorrect understanding of the facts, or having to reconsider technical arguments based on a revised set of facts. It would also allow both the ATO and taxpayer to better appreciate the likely facts that are in agreement and the facts in dispute.

9.43 In addition, this would provide more time to discuss the technical merits of an issue before the completion of the audit and alleviate the current concern that an assessment often follows the issue of a position paper without taxpayers having had an appropriate opportunity to respond.

9.44 It would also reduce the potential need for the further clarification of the facts at the objection stage and ensure that there is a more comprehensive dialogue and testing of the technical merits of the ATO and taxpayer positions before the finalisation of the audit.

9.45 For certain issues, such as valuations, the ATO should also look to bring together external experts to discuss any differences in methodology and valuations before an amended assessment is issued. Only after this process has been exhausted and there are still differences in the market valuation should the ATO resort to issuing amended assessments.

9.46 The IGT also believes that the ATO should try and avoid circumstances where a taxpayer is issued with a position paper with a follow-up assessment shortly thereafter because the ATO's two-year audit timeframe is due to expire. The ATO should not be influenced by the shorter self-imposed two year timeframe and should afford a taxpayer the opportunity to respond within a reasonably agreed timeframe. Where the statutory limitation period for amendment is due to expire, rather than issuing an amended assessment that may not be based on a final ATO view, the ATO should seek the taxpayer's agreement to extend the amendment period.

Recommendation 9.1

The ATO should develop and publish enhanced written guidance on the purpose, content and drafting of position papers in an appropriate publicly available publication.

ATO Response


This will be achieved through the publication of the revised and updated LB&I Compliance Manual, in line with our response to Recommendation 4.2, 4.3 and 6.2.

Recommendation 9.2

The ATO should enhance its quality assurance processes to ensure position papers issued by the ATO clearly set out and address the following:

  • issues subject to audit;
  • material facts relevant to each issue that are agreed (including appropriate references to supporting evidence);
  • material facts upon which the taxpayer or the ATO rely that are in contention (or expected to be in contention);
  • the legal position or view the ATO has adopted and the reasons why (including appropriate legal and factual analysis); and
  • the taxpayer's legal position or views and their contentions as to the ATO's legal position.

ATO Response


As noted in our response to Recommendations 5.2 and 8.8, we are currently in the process of updating and enhancing our guidance to IQF assessors. This will include further points directing our assessors to consider the manner in which position papers set out these matters.

Recommendation 9.3

Where a taxpayer does not agree with the content of the ATO position paper (whether on fact or law) a senior technical specialist should review the taxpayer's response, form a view and sign-off on the final position paper. The senior technical specialist should have sufficient technical expertise and should not have been directly involved in the audit.

ATO Response


It should be understood and emphasised that such a review is not a full internal review of all matters or issues in the audit, unless this is warranted. The review will examine the areas of disagreement as identified by the taxpayer in their response to the position paper.

1 ATO Position paper procedures.

2 LB&I Compliance Manual, Chapter 12, p 24.

3 ATO Position Paper Procedures.

4 LB&I Compliance Manual, Chapter 12, p 24.

5 LB&I Compliance Manual, Chapter 12, p 25.

6 LB&I Compliance Manual, Chapter 12.

7 LB&I Compliance Manual, Chapter 12, pp 36-37.

8 LB&I Compliance Manual, Chapter 12, p 37.

9 ATO position paper pProcedures.

10 ATO position paper procedures.

11 ATO position paper procedures.

12 ATO position paper procedures.

13 ATO position paper procedures.

14 ATO position paper procedures.