2.1 The ATO has recognised that ADR has generally been employed during litigation33 rather than being addressed earlier during the audit or objection stages. In other forums, the ATO has noted that 'in the past, the ATO had tended to focus on immediate activities, and therefore dispute resolution was seen as more of a downstream process.'34

2.2 Following a number of the IGT reviews, for example the Review into the underlying causes and management of objections to Tax Office decision35 (the Objections review), which called for an end-to-end approach to resolution of disputes, the ATO has embarked on a program of work to implement such an integrated system, seeking to avoid litigation and resolve disputes as close to the original decision as possible (see the figure below).

Figure 1: An integrated approach to dispute minimisation and resolution

Graphic showing the integrated approach to dispute minimisation and resolution. This seeks to avoid litigation and resolve disputes as close to the original decision as possible.

View image enlarged

2.3 The driving principles underlying the ATO's integrated approach are:36

  • good decision making principles applied to minimise disputation;
  • early identification of likely disputation;
  • appropriate approaches to resolving disputes in a transparent and cost effective manner deployed; and
  • all relevant information and evidence captured.

2.4 As part of its work to implement the integrated approach, the ATO is looking to implement the following initiatives:37

  • our approach to disputation published on the ATO website;
  • better on-line assistance to taxpayers wishing to lodge objections;
  • streamlined work processes especially in simple matters to reduce costs for all;
  • at objection stage tools deployed to identify likely ongoing disputation, prompting officers to take early action to attempt to resolve;
  • early resolution reports for appeals resolved without a hearing, Dispute Resolution workshops for ATO officers and Legal practitioners, Dispute Management Plan (in progress); and
  • at original decision stage developing tools to identify ongoing disputation, prompting officers to take early action to minimise (in progress).

2.5 The ATO has also developed and is implementing a number of improvements and initiatives to encourage and enhance the use of dispute resolution techniques throughout its compliance process. These are discussed below.

ATO policies and publications

Practice Statement PS LA 2007/23

2.6 Practice Statements are issued by the ATO to 'provide direction and assistance to staff on the approaches to be taken in performing duties involving the application of the laws administered by the Commissioner.'38 It is mandatory for ATO staff to search for, and follow, any practice statements which may be relevant for their work. A failure to do so may result in disciplinary action under the Public Service Act 1999.39

2.7 Practice Statement PS LA 2007/23 Alternative Dispute Resolution in ATO Disputes and Litigation (PS LA 2007/23)40 contains the ATO's published view on its approach to ADR (including direct negotiation between the ATO and the taxpayer).

2.8 PS LA 2007/23 states that 'the ATO recognises and supports the use of Alternative Dispute Resolution (ADR) in appropriate cases as a cost effective, informal, consensual and speedy means of resolving disputes.'41 It further states that while 'not all cases are suitable for ADR . for those that are, it is essential that parties make an informed consideration and select a process which is suited to the circumstances and nature of the dispute.'42

2.9 Specifically, the practice statement instructs ATO officers that:

Officers playing a role in the management of ATO disputes particularly those in litigation must consider whether it would be appropriate to participate in some form of ADR to attempt to resolve the dispute. In doing so officers must have regard to the circumstances of the case, applicable law and relevant ATO policies, the attitude of the other party to ADR and the attitude of the relevant court or tribunal if in litigation.43

2.10 The practice statement generally observes that the hallmarks of when ADR may be appropriate are as follows:44

  • there must be issues that are able to be negotiated;
  • the ATO has something to give;
  • the taxpayer/other party has something to give;
  • the dispute is capable of being settled within existing settlement policies and practices; and
  • settlement must be preferable to judicial determination.

2.11 PS LA 2007/23 also outlines the instances in which the ATO considers that ADR is not appropriate. This will be further discussed in Chapter 4.

2.12 Other matters addressed by the practice statement include the use of ADR in different forums such as the AAT, the Federal Court, Federal Magistrates Court and the State courts.

The ATO Code of Settlement Practice

2.13 The ATO's Code of Settlement Practice 'provides guidelines on the settlement of taxation disputes in relation to all taxpayers. It provides guidance as to the situations in which settlement could be considered and outlines the processes which should be followed.'45 It also assists in ensuring that 'settlements of taxation disputes occur only in appropriate cases and in accordance with established practices that provide the necessary checks and balances, and there is transparency and accountability in the settlement process.'46 Practice Statement 2007/5 mandates that 'tax officers who make settlement decisions must follow the Code.'47

2.14 The Code, like PS LA 2007/23, generally outlines the circumstances in which the ATO considers that settlement of taxation disputes may be appropriate and those in which it may be inappropriate.48

2.15 Specifically, paragraphs 25 and 26 of the Code state:

25. Circumstances where it would be generally inappropriate to settle include where:

  • the outcome of the settlement would be contrary to an articulated policy reflected in the law;
  • the matter is subject to escalation to settle the ATO view;
  • the matter is clear-cut or there is a clearly established and articulated ATO view on the issue, and there are no special circumstances such as those described in paragraph 26;
  • the settlement would involve inconsistency of treatment for taxpayers in comparable circumstances;
  • it is in the public interest to have judicial clarification of the issue and the case is suitable for this purpose — in such cases, it may be appropriate to fund the litigation under the test case funding program;
  • litigation of the matter through the courts could have a significant flow-on compliance effect and the case is suitable for this purpose;
  • a similar matter is being litigated and awaiting outcome;
  • the taxpayer's case is poor and unlikely to be pursued through the Administrative Appeal Tribunal (AAT) or court. Care is necessary to ensure the settlement practice does not encourage frivolous objections and appeals; and
  • inability to pay a tax debt as it falls due has been deliberately created and it would be inappropriate to consider settlement without first escalating the matter (see paragraph 35).

26. As a general guide, settlement may be an appropriate way to resolve a matter if:

  • the cost of litigating (including internal ATO costs) is out of proportion to the possible benefits, having regard to the prospects of success (including collection of the tax), and likely award of costs, assessed as objectively as possible;
  • there are complex factual or quantum issues in contention, or evidentiary difficulties, or there is genuine uncertainty as to the proper application of the law to the facts, sufficient to make the case problematic in outcome or unsuitable for resolution through the AAT or courts, (for example, where the issue is peculiar to the particular taxpayer, and the opposing positions are each considered reasonably arguable.) This is particularly so where the settlement includes an agreed approach for future income years;
  • a participant or group of participants in a tax avoidance or other arrangement has come to accept the Commissioner's position and settlement is around the steps necessary to unwind existing structures and arrangements;
  • the settlement will achieve compliance by the taxpayer, group of taxpayers, or section of the public, for current and future years, in a cost-effective way; and
  • unique or special features exist which make it unsuitable for resolution through litigation, for example, a dispute about the valuation of a unique asset.

2.16 Specifically, the Code notes that 'there are a range of alternative dispute resolution approaches, including mediation, which could be used, depending on the circumstances, to assist in reaching settlement'49 and refers back to PS LA 2007/23 for further guidance on the use of ADR in the settlement of taxation disputes.

Other ATO documents

2.17 The ATO has also published certain documents which outline its approach to compliance in relation to certain sectors of the taxpayer market, namely, the Large Business and International sector and High Wealth Individuals.

2.18 In the booklet Wealthy and Wise: A Tax Guide for Australia's Wealthiest People (the Wealthy and Wise booklet), the ATO notes that 'unless there is an immediate risk to the revenue, such as where funds are leaving the country or a business is being liquidated, we will normally discuss the case with the taxpayer before making an adjustment, including making a full and frank disclosure of our position, and attempt to resolve any disputes that arise.'50

2.19 The Large Business and Tax Compliance (LBTC) booklet is more specific on the use of ADR. It notes 'although we [the ATO] always attempt to resolve disputes directly with you and your representative in the first instance, where a direct negotiation has not resolved the issue we will consider whether an alternative dispute resolution (ADR) process may assist.'51

2.20 The LBTC booklet also notes that when in litigation, the ATO will continually review whether ADR may assist to resolve some or all of the issues in dispute though, like PS 2007/23, it notes those instances it considers where ADR may be inappropriate, including where 'it would be in the public interest to have judicial clarification of the issues in dispute and the dispute is a suitable vehicle to test the issues.'52

ATO website information

2.21 The ATO's website also contains general information in relation to dispute resolution and ADR.

2.22 The 'ATO approach to dispute resolution' webpage encourages taxpayers to speak directly with the ATO early where it is identified that there is, or may be, a disagreement in relation to a view or a decision. It notes:53

By working together, we may be able to resolve a dispute quickly without the need for more formal review processes. Ongoing dialogue is essential in gaining a complete understanding of your circumstances. It also gives us an opportunity to explain our understanding of your situation and our likely answer. This will allow you to consider our view and respond, including providing any further information to assist us in reaching a decision.

2.23 The ATO's webpage further outlines what it expects of taxpayers, and what taxpayers can expect, to ensure that ATO officers apply the law correctly. Specifically, the webpage states that taxpayers should:54

  • provide all relevant information so that we can make correct, timely decisions regarding your circumstances. It is not necessary to wait for us to ask for it;
  • respond promptly, fully and accurately if we ask for information or clarification about something you've told us;
  • if you consider it would help us, say in complex matters, provide us with your view on how the relevant laws apply to you, taking account of your circumstances; and
  • let us know as soon as possible if you think we've misunderstood something or made a mistake.

2.24 The webpage also states that the ATO will, where appropriate:55

  • talk with you to ensure we have a shared understanding of the issues and relevant facts in the matter;
  • ask for any additional information we think we need to make our decision and explain to you why we need it;
  • explain our position to you and listen to, and fully consider, any issues or alternative positions you put forward; and
  • ensure we are clear on where we agree and work to identify and, if possible, resolve any issues in dispute.

2.25 Another ATO webpage, headed 'Alternative dispute resolution', it refers to PS LA 2007/23 and notes that:56

We recognise and support the use of alternative dispute resolution (ADR) as a cost-effective, informal, consensual and speedy means of resolving disputes. This extends to using ADR to deal with only part of a dispute or to deal with procedural or interlocutory matters in relation to a dispute.

All tax officers handling disputes are required to consider whether ADR processes, which include direct engagement and negotiation with taxpayers and their representatives, might assist in the resolution of the dispute or limit the scope of the dispute in some material way.

ATO Dispute resolution network

2.26 Towards the end of the 2007 calendar year the ATO's Law and Practice business line established a Dispute Resolution Network (DRN) to facilitate the increased use of ADR across the ATO.57 The DRN was one element of a broader project to reduce the escalating costs of disputes involving taxpayers and the ATO through the use of different dispute resolution processes (including ADR) to resolve or narrow the scope of disputes.

2.27 The ATO has advised the IGT that the DRN comprises relatively senior staff within the ATO who possess a good understanding of relevant ATO policies and procedures for settling of disputes, a high degree of judgment and a willingness to work with other business lines across the ATO to 'identify and resolve the entirety of any dispute.'58

2.28 The DRN is required to 'provide an internal support structure for staff considering the use of alternative dispute resolution methodologies or processes.'59 In addition, it was noted that names of the network's members are published on the ATO's intranet and that the network would assist in encouraging development in negotiation and dispute resolution skills and to consolidate these through the updating of relevant information, policies and procedures and training products within the ATO.60

ATO Litigation Risk Indicator

2.29 Since 2009, the ATO has employed a Litigation Risk Indicator (LRI) at the objection stage to better inform and assist decision makers identify matters with a risk of ongoing disputation. The LRI comprises fourteen risk indicators.61

2.30 An ATO objection officer is required to assess the particular case against each of the fourteen risk factors and determine the risk of ongoing dispute and litigation, which are categorised as follows:

  • not applicable — where an objection is allowed in full, is invalid, settled or withdrawn by the taxpayer;
  • unlikely;
  • likely (interim);
  • likely (AAT); or
  • likely (Federal Court).

2.31 Where the LRI identifies a matter as 'likely' to proceed to litigation the objection officer is required to escalate the matter through their team leader for review and engagement of relevant ATO officers to see if the matter can be resolved before it crystallises into a formal dispute. Broadly, the officers which may be engaged include those from the Tax Counsel Network (TCN), Centre of Expertise (COE), Legal Services Branch (LSB) and the DRN.62

2.32 The ATO has noted the importance of utilising the LRI to assist in identifying cases likely to be litigated. The ATO has noted that the use of the LRI assists in ensuring that the ATO:63

... can engage the right people in a more timely way, ensuring that we have all facts and evidence by the time we have the first conference in the AAT or the scheduling conference in the Federal Court. So, if litigation is likely, we can proceed to litigation more quickly, which also helps to cut down time and costs for both parties. The LRI also works in reverse. It highlights to us the cases that aren't likely to proceed to litigation, which may be appropriate for dispute resolution.

2.33 The ATO has recently completed a pilot at the audit stage with the Dispute Risk Indicator (DRI) which is aimed at early identification of cases at risk of dispute.

2.34 Like the LRI, the ATO seeks to use the DRI to engage appropriate personnel early in the process where there is a risk of ongoing dispute. The ATO expects to introduce the DRI later this year.64

ATO NTLG Dispute Resolution Sub-committee

2.35 In June 2011 the ATO established the National Tax Liaison Group (NTLG) Dispute Resolution Sub-committee with a membership comprising 'representatives of major tax, law and accounting professional associations, senior members of the ATO, the Attorney General's Department, NADRAC, the Federal Court, the AAT, individual practitioners and prominent academics.'65

2.36 The sub-committee was 'established to drive the Attorney-General's Strategic Framework for Access to Justice in the Federal Civil Justice System, with respect to taxation disputes'66 and to 'provide stakeholders and senior ATO leaders with a forum for consultation to develop dispute resolution strategies which encourage disputing parties to focus on prompt resolution to avoid or minimise the scope of litigation.'67

2.37 The sub-committee is an advisory and consultative forum and does not play a role in the resolution of specific taxation disputes.

ATO Dispute Management Advisory Panel

2.38 In 2011, the ATO commenced a pilot Dispute Management Advisory Panel (the Panel) for cases in its Large Business and International (LB&I) business line to 'provide advice around the strategic management of key disputes, including consideration of the most appropriate cases to take forward to litigation and cases that should be resolved through, or benefit from, alternate dispute approaches.'68

2.39 Specifically, the Panel will seek to assist LB&I to effectively and holistically manage its disputes through:69

  • Early identification of the right cases for litigation to address ATO strategic risks and clarify the law.
  • Internal processes that are aligned with the principles of EDR/ADR.70
  • Processes supporting the early engagement of Legal Services, TCN and external counsel in potential litigation.
  • Ensuring where litigation occurs, the ATO position is well supported by the right arguments and evidence.
  • Working with Risk Owners to strategically manage risk through the inclusion of appropriate dispute management strategy in their broader risk mitigation strategies.

2.40 The Panel will also avail itself to assist in the implementation of Recommendation 9.3 of the IGT's Report into the Australian Taxation Office's large business risk review, audit policies, procedures and practices (the Large Business review).71

2.41 The IGT's recommendation 9.3 stated:72

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.

2.42 In particular, where the reviewing officer is unable to agree with the audit team's position, the matter may be referred to the Panel for advice.73

2.43 As the Panel is currently in its early stages of operation, it is not yet possible for the IGT to assess the utility and effectiveness of the Panel in identifying and resolving disputes.

ATO Strategic Internal Litigation Committee and case management plans

2.44 When litigating tax matters, or complex debt matters, the ATO utilises Strategic Internal Litigation Committee (SILC) meetings to ensure that all ATO stakeholders are properly apprised of issues and developments in the case. A separate SILC is convened for each tax technical litigation matter, regardless of the forum in which the matter is litigated, and meetings are held at all critical stages of the proceeding.74

2.45 The composition of a particular SILC will vary from case to case but will always include an officer from the ATO's LSB and the business line officer. It may also include a member from the TCN or a COE.75

2.46 Relevantly, during the SILC process, the ATO litigation team is to:76

… consider whether the matter is suitable for ADR. If suitable, it is essential that parties carefully consider and select a process which is suited to the circumstances and nature of the dispute.

2.47 As part of the ATO's general case management process for matters in litigation, the ATO's LSB officer is required to complete and maintain a SILC Case Management Plan (CMP) which 'is a document setting out the details and status of a litigation matter, including the litigation strategy and any milestones ... and include all critical information such as a summary of the issues, the ATO view, the significance of the matter, the litigation risk rating and the ongoing costs related to the matter.'77

2.48 The ATO considers that the active use of SILC CMPs will ensure that there is:78

  • proactive management and regular monitoring of costs, for example, by obtaining cost estimates. The SILC Case Management Plan provides for estimates of costs and actual costs to date;
  • strategic management of litigation by monitoring the timely progress of cases;
  • collaborative partnerships between all relevant stakeholders;
  • limitation of interlocutory disputes where appropriate; and
  • increased consideration and use of ADR.

2.49 A CMP must also be completed by external solicitors representing the ATO when litigated matters are not managed in-house.

ATO Transforming tax technical decision making project

2.50 For some time there have been concerns about the ATO's tax technical decision making and taxpayer access to ATO technical experts. The IGT raised such concerns from as early as 2005 in both review and annual reports.79 In line with these concerns, the ATO has embarked on a number of initiatives to deliver more effective and efficient use of tax technical resources through earlier engagement of tax technical expertise.

2.51 The ATO is seeking to do this mainly through its Transforming Tax Technical Decision Making project (the T-project) which aims to improve outcomes for the community. The T-project flows directly from five key recommendations of the ATO's Law Improvement Project to:80

  • Bolster technical networks within the business/service lines — Work with Compliance and Operations to provide early engagement for Active Compliance, Interpretative Advice and Operations staff dealing with technical matters.
  • Investigate and establish early engagement mechanisms — including Tax Counsel Network/Centres of Expertise Consultants, tax clinics etc, to help deliver timely, quality decisions for the community and build technical capability in the business/service lines, and ensure less difficult or risky cases are not escalated to Law.
  • Change the basis of escalation to Centres of Expertise and Tax Counsel Network to one based on a formal risk assessment, with 'precedential' one of several criteria to be considered.
  • Design and implement a practice management function in Law, to manage the activities of our highest level experts and best meet the expectations of the community and ATO business/service lines.
  • Design and implement a review process at sub-plan level to align law interpretative advice priorities with corporate and sub-plan priorities. This should be a two way process, with Law advising on emerging issues and risks the sub-plans should consider and where further risk assessment is required.

2.52 The ATO is currently conducting a number of pilots as part of the T-project and expects to implement these more broadly this year.

2.53 The IGT considers that enhancements in technical decision making and the effective employment of ATO technical expertise should go some way to ensuring that matters at risk of ongoing dispute and litigation are identified and addressed by the most appropriate ATO personnel.

2.54 The improvements should also align the ATO's efforts with the then Joint Committee of Public Accounts' (JCPA) recommendation that the ATO 'commit itself to providing decisions to taxpayers which are final and supportable in the first instance.'81

ATO compliance capability

2.55 As mentioned above, the IGT raised concerns regarding the ATO's technical capabilities as early as 2005. In addition, stakeholder concerns regarding the capability of ATO compliance staff were previously considered in the IGT's Large Business review82 and the Review into the ATO's small and medium enterprise audit and risk review policies, procedures and practices.83

2.56 During the course of this review, the ATO advised the IGT directly that:

The ATO has invested significant resources in its active compliance activities in 2011-12 aimed at instilling a stronger focus on active case management to reinforce principles such as improved on-going communications and early engagement with taxpayers, obtaining relevant information early during audit activities, and explaining why that information is required during audits. This active case management focus is across all Compliance business lines and is intended to touch close to 5,000 officers before 30 June 2012.

Furthermore, the ATO is planning a revamped learning and development activity for Compliance staff around good technical decision making in 2011-12. Part of this activity will focus on key intervention points aiming to make good quality technical decisions during audits and disputes.

2.57 The ATO further advised that these are two of a number of measures underway to improve ATO technical decision making and they were initiated, in part, as a result of the ATO's 2011-12 internal audit and objections review which is discussed below at paragraphs 2.69 to 2.72.

Building internal ATO capability on dispute management and resolution

2.58 The ATO has a centralised learning and development section, on which it spends about $70 million per year, which seeks to build staff knowledge and capability through a range of published training guides, in-house development programs, external programs and conferences.84

2.59 As part of its learning and development, the ATO has run a number of different conferences and workshops in relation to dispute management and ADR to assist it implement strategies to more effectively resolve disputes. In 2011 the ATO, in partnership with the Law Council of Australia, ran a series of workshops around the country to highlight its commitment to dispute resolution and to discuss its approach generally. Participants at these workshops included practitioners, ATO officers, ADR experts, NADRAC, registrars of the Federal Court and AAT and former members of the judiciary.

2.60 The ATO also advised the IGT that it is committed to a series of training seminars to be run nationally between April and June 2012 by a leading dispute resolution expert. The training is targeted towards staff at the APS6 level and above whose current roles require the application of negotiation and influencing skills.

2.61 The need to enhance skills and develop knowledge in conflict management and dispute resolution85 and the ATO's learning and development initiatives in this area will be explored further in Chapter 3.

ATO hosting ADR Inter-Agency Group

2.62 Since 2009, the ATO has hosted and chaired an ADR Inter-Agency Group which is attended by senior officers from a number of Commonwealth government agencies including the Department of Defence, the Attorney-General's Department, the Federal Court and the AAT.

2.63 The Group meets on a quarterly basis and discusses topical issues in ADR and dispute resolution relevant to government agencies. It also provides a collaborative forum for government agencies to share knowledge, best practices and initiatives in ADR.86

The ATO's internal ADR Register

2.64 To assist it to monitor the use of ADR, for a number of years, the ATO has maintained an ADR Register in which staff are required to record details of all matters in which an externally facilitated ADR process is undertaken. As part of this review, the ATO has provided data from the ADR Register for the period 1 July 2008 to 30 June 2011 which comprises 250 tax dispute cases in which some form of ADR involving a third party practitioner was used.

2.65 Some of the data requested by the IGT, such as which party initiated the ADR, was not previously captured in the Register and was compiled by the ATO specifically for the purposes of the IGT's review.

2.66 The ATO has advised that the level of confidence in the accuracy of the data which has been captured by the ADR Register is much lower than it would like. Some of the reasons for this were the scope for human error and some perceived ambiguity in the information required to be entered.

2.67 The IGT notes that data from the ADR Register does not fully capture the ATO's dispute resolution efforts as, in particular, its participation in AAT case conferences is not recorded. Accordingly, data from the Register is used by the IGT in this report as indicative only and should not be considered to be definitive.

ATO dispute management plan

2.68 An important development that was brought to the IGT's attention during the conduct of this review was the ATO's commitment to develop a Dispute Management Plan (DMP). The ATO is currently in the process of developing its DMP in line with NADRAC's recommendation and strong encouragement from the former Attorney-General.87 The ATO anticipates that a draft of the plan will be available by the middle of 2012 for internal circulation and discussion.

ATO Objection Review Report

2.69 In July 2011, the ATO commenced internal review of objections across three business lines — Micro Enterprise and Individuals (ME&I), Small & Medium Enterprise (SME) and Indirect Tax (ITX). A draft copy of the report of this review — the Objection Review Report (ORR) — and related briefing documents have been provided to the IGT.

2.70 Through sampling and analysing 145 cases, the ATO review sought to better understand current processes in Compliance and to identify opportunities for continuous improvement. Overall, the ORR seems satisfied with the quality of the technical decisions in the majority of audit and objection cases. The number of objections from active compliance activities also seems relatively small.88

2.71 However, the ORR has identified that there were opportunities for improvement particularly in relation to early engagement with taxpayers and obtaining the 'right information at the right time.'89

2.72 Where relevant, the IGT will outline further findings and statistics in the ORR in later chapters. As the ORR was provided to the IGT in draft form, the IGT acknowledges that conclusions drawn or agreed improvements arising out of that report may change before the final version is presented to the Commissioner.

Stakeholder concerns regarding ATO use of ADR

2.73 The IGT acknowledges and is aware that the ATO's efforts in relation to ADR have been recognised publicly.90 Indeed, during consultations on this review, stakeholders recognised the ATO's commitment to ADR in more recent years and welcomed it.

2.74 However, concerns raised in submissions to the IGT suggest that there is significant room for improvement. These concerns include:

  • ATO officers at the audit stage of the compliance process are too inexperienced, do not appreciate and understand the nature of the taxpayer's business and transactions and seem unwilling or uncertain about engaging with taxpayers to address issues of concern;
  • the ATO's approach to information gathering and information sharing is increasing costs for taxpayers and is not conducive to early resolution of disputes;
  • a lack of awareness, authority and skills on the part of ATO staff generally to identify opportunities for, and to engage in, ADR to resolve disputes at an earlier point in time thereby prolonging the dispute and increasing costs;
  • senior technical experts are only engaged in matters late in the compliance process, resulting in matters not being able to be settled earlier;
  • when attempting to engage the ATO in ADR, taxpayers (especially smaller taxpayers) face difficulties in identifying appropriate ATO escalation channels or personnel;
  • the ATO has not always been upfront about matters being progressed for law clarification purposes and which purportedly cannot be settled;
  • when participating in ADR, the ATO is not properly managing expectations about the overall purpose of the ADR, the matters that may or may not be set for discussion and the authority of ATO officers attending; and
  • general concerns regarding the independence of the objections process and the ATO's management of litigation, particularly in large complex matters.

2.75 These are considered further through the remainder of this report.


33 M. D'Ascenzo, In Search of Solutions, speech delivered to the Administrative Appeals Tribunal and the ACT Bar Association seminar: 'The obligation to assist: model litigants in Administrative Appeals Tribunal Proceedings', 26 August 2009, viewed on 1 October 2011.

34 Australian Taxation Office, Micro Business Partnership Minutes, 3 August 2011, viewed on 1 February 2012.

35 Inspector-General of Taxation, Review into the Underlying Causes and Management of Objections to Tax Office Decisions, 11 August 2009.

36 Australian Taxation Office, An integrated approach to dispute minimisation and resolution, copy provided by the ATO to the IGT. This is generally reflected in the ATO approach to dispute resolution webpage.

37 ibid.

38 Australian Taxation Office, Practice Statement PS LA 1998/1 Law Administration Practice Statements, Canberra, 21 May 2009, viewed on 5 April 2012, para. 1.

39 ibid., para. 6.

40 Australian Taxation Office, Practice Statement PS LA 2007/23 Alternative Dispute Resolution in ATO Disputes and Litigation, Canberra, 26 October 2010, viewed on 20 June 2011.

41 ibid., para. 1.

42 ibid., para. 3.

43 ibid., para. 8.

44 ibid., para. 9.

45 Australian Taxation Office, Code of Settlement Practice, Canberra, 23 December 2011, viewed on 23 May 2012, para. 1.

46 ibid., para. 3.

47 Australian Taxation Office, Law Administration Practice Statement 2007/5 Settlements, Canberra, 8 February 2012, viewed on 23 May 2012, para. 5.

48 ibid., paras. 25 and 26.

49 ibid., para. 37.

50 Australian Taxation Office, Wealthy and Wise: A Tax Guide for Australia's Wealthiest People, Canberra, 1 March 2010, viewed on 27 June 2011, p. 18.

51 Australian Taxation Office, Large Business and Tax Compliance, Canberra, 28 March 2012, viewed on 23 May 2012, p. 34

52 ibid., p. 34.

53 Australian Taxation Office, ATO approach to dispute resolution, Canberra, 30 June 2011, viewed on 2 December 2011.

54 ibid.

55 ibid.

56 Australian Taxation Office, Alternative Dispute Resolution, Canberra, 1 March 2010, viewed on 2 December 2011.

57 Internal ATO Minute issued by First Assistant Commissioner (Law & Practice), dated 18 December 2007.

58 ibid.

59 ibid.

60 ibid.

61 Australian Taxation Office, Online Resource Centre for Law Administration (ORCLA) intranet page, document entitled 'Risk of Litigation - Overview'.

62 Australian Taxation Office, ORCLA intranet page, document entitled 'Risk of Litigation - Escalation'.

63 J. Granger, ATO Law Expertise: Evolution or Revolution, speech delivered to the 24th Australasian Tax Teacher's Association Conference 2012, Canberra, 20 January 2012, viewed on 20 January 2012.

64 ibid.

65 Australian Taxation Office, NTLG Minutes, September 2011, Canberra, 9 December 2011, viewed on 15 December 2011, item 15.4.

66 Australian Taxation Office, Dispute Resolution Charter, Canberra, 29 February 2012, viewed on 15 March 2012.

67 ibid.

68 Australian Taxation Office, LB&I Dispute Management Advisory Panel Draft Charter, document provided to the IGT.

69 ibid.

70 The Panel uses the acronym EDR to denote 'early dispute resolution'. The IGT does not otherwise use the EDR acronym in this report.

71 Inspector-General of Taxation, Report into the Australian Taxation Office's large business risk review, audit policies, procedures and practices, 7 September 2011.

72 ibid., p. 149.

73 Australian Taxation Office, above n. 69.

74 Australian Taxation Office, Practice Statement PS LA 2009/9 Conduct of Tax Office Litigation, Canberra, 6 September 2010, viewed on 20 June 2011, para. 114.

75 ibid., para. 115.

76 ibid., para. 116.

77 ibid., para. 118.

78 ibid., para. 120.

79 See for example: Inspector-General of Taxation, Work Program 2011-12, Sydney, 4 April 2011; Inspector-General of Taxation, Annual Report 2009-10, Sydney, 2011, pp. 11 and 12; Inspector-General of Taxation, Review into Delayed or Changed Australian Taxation Office views on Significant Issues, Sydney, 17 March 2010, pp. 42 and 43.

80 Australian Taxation Office, above n. 65, item 11.

81 Joint Committee of Public Accounts, Report 326: An Assessment of Tax, Commonwealth of Australia, Canberra, November 1993, p. 270.

82 Inspector-General of Taxation, above n. 71.

83 Inspector-General of Taxation, Review into the ATO's small and medium enterprise audit and risk review policies, procedures and practices, Sydney, 24 April 2012.

84 J. Granger, above n. 63.

85 F. Dixon SC, speech delivered at the ADR in Government Forum, Canberra, 4 June 2008, viewed on 21 June 2011, p. 3.

86 Attorney-General's Department, Dispute Management in Australian Government Agencies, Canberra, viewed on 2 December 2011.

87 Australian Taxation Office, NTLG Dispute Resolution Sub-Committee Minutes, August 2011, Canberra, 9 December 2011, viewed on 15 December 2011, item 5.

88 Australian Taxation Office, Objection Review Report (Draft dated 21 February 2012), p. 3.

89 ibid.

90 F. Dixon SC, above n. 85.