The Inspector-General of Taxation and Taxation Ombudsman (IGTO) has recently released its latest report on the initial review of the ATO’s handling of objections by taxpayers. The catalyst for this latest investigation into the ATO was feedback obtained on the IGTO’s register of suggested areas for investigation as well as stakeholder feedback.
The interim report looked at objections data obtained from the ATO mainly for the 2019, 2020 and 2021 financial years. It seeks to provide taxpayers with an insight into the breadth and scope of objections work undertaken by the ATO. While some data for the 2017 and 2018 financial years was available, the IGTO noted that the ATO declined to provide all the data, citing data integrity and significant manual work required to process it.
In this initial stage of investigation, the IGTO did not investigate the data provided by the ATO beyond analysing, tabulating, extrapolating, and charting it in order to report the information publicly. The initial observations of the IGTO can be summarised as follows:
- The ATO appears to have processed and actioned a higher volume of objection cases in the 2021 financial year compared to prior years. This was coupled with a reduction in the number of withdrawn or invalid objections. Most of the underlying causes for the influx in 2021 were due to COVID-19 objections lodged by small businesses;
- A large proportion of objections received each year are self-initiated objections and in each of the financial years investigated, self-initiated objections exceeded objections lodged against ATO compliance action;
- Around 20% of “valid” objections are withdrawn without a decision being issued; and
- Around 50% of objections for the 2019 and 2020 financial years were lodged by registered tax agents; that proportion increased to 58% for the 2021 financial year.
According to the IGTO, these observations will provide the basis for Phase 2 of the investigation, where taxpayers and other stakeholders can make further submissions. Previous issues of concern identified include:
- The lack of independence and impartiality of the objection process (either actual or perceived);
- A lack of clarity in objection decisions;
- Insufficiently resourced objection functions, leading to objections officers reviewing decisions of more senior staff, or officers being involved in objections where they previously provided advice on the matter; and
- A lack of sufficient knowledge of the objection process on the part of some taxpayers, especially in the areas of lodging effective objections, which may lead to unnecessary time and effort.
Some of areas that the IGTO will look to pursue in Phase 2 of the investigation include:
- Reasons for the high proportion of self-initiated objections and their impact on ATO resourcing;
- Underlying causes for objections being withdrawn prior to a decision being issued, and its impact on ATO resourcing;
- The composition of tax professionals that are assisting taxpayers with objections, as well as the comparative timeliness and outcomes of objections that are prepared and lodged by the taxpayer without assistance compared to those that are lodged with the assistance of a professional; and
- Whether reporting by the ATO of the quantum of tax in dispute would assist to improve its administration of objections overall.