A taxpayer may object to an adverse taxation decision by lodging an objection with the Australian Taxation Office (ATO).
Objections may be lodged against an ATO assessment, determination, notice, decision or failure to make a private ruling. Perhaps the most common objection is against an amended assessment of income tax after an adverse audit decision.
In objecting to an amended assessment of income tax, a taxpayer needs to prove:
- the assessment is incorrect; and
- their actual taxable income.
The taxpayer has the onus of proof, which can be difficult to meet. For example, it may be relatively simple to prove that an amended assessment is incorrect, but far harder to prove the actual income position. A lawyer working in conjunction with the taxpayer’s accountant can assist at this stage by:
- recommending which arguments are likely to be accepted;
- advising on which evidence may satisfy the onus of proof; and
- mounting a persuasive legal argument supported by the evidence to maximise your prospects of a favourable outcome.
The importance of providing the right evidence as part of the objection process cannot be overstated.
Lodging an objection is the first step. The ATO invariably requires further documents or clarification before it will rule on an objection. Objections can run over months or even years.
An objection should dispute the facts and legal issues relied upon by the ATO. It must be lodged in the approved form published on the ATO website. Failure to submit an objection in the approved form and without evidence may invalidate the objection.
DBL Solicitors will collaborate closely with your accountant as part of the objection process.
Objections must be lodged within time. The time limit will depend on the nature of the decision being objected to. Broadly, and in the case of an original income tax assessment, a taxpayer has either two years (for individual or small business entities) or four years (for medium and larger companies or trusts) from the date of service of the assessment to object. For amended assessments, the objection must be lodged by the later of the amendment period of the original assessment or sixty days after service of the amended assessment.
In relation to administrative penalty assessments, cash flow boost and GST decisions, the objection period may only be sixty days.
In the event an objection is lodged out of time, the taxpayer may request the ATO to deal with it as if it had been lodged in time. In requesting an extension, a taxpayer must provide an explanation for the failure to lodge within time and have an arguable case.
As an extension cannot be guaranteed, it is essential that advice is obtained as soon as possible after receiving an adverse decision from the ATO to ensure that an objection can be prepared and lodged within time.
Precise drafting of the objection is also essential, although the grounds of the objection and evidence to be relied on may be supplemented during the process. In any later court proceeding, a taxpayer is limited to the grounds contained in their objection. Therefore, an objection must exhaustively state all grounds relied upon by the taxpayer.
Once an objection has been lodged, the ATO must rule on the objection. The ATO may allow the objection (either in whole or in part) or disallow it.
If the ATO unreasonably delays making a decision on the objection, the taxpayer may give written notice to the ATO compelling it to make a decision. By compelling a decision, even if unfavourable, the taxpayer will force the ATO to provide reasons and an opportunity for the taxpayer to review or appeal the decision through the Administrative Appeals Tribunal (AAT) or Federal Court.
The time limit for lodging a review or appeal in the AAT or Federal Court against an unfavourable objection decision is usually 60 days.
If you receive an adverse taxation decision, do not delay in contacting DBL Solicitors for a confidential discussion.
Ben Trost
Senior Litigation Solicitor
