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Tax Return Amendments

If you’ve made a mistake in your tax return, or if the Tax Office has made a mistake, or if you disagree with a tax office decision or assessment, then there are procedures for making amendments to tax returns.

The Tax Office can independently initiate amendments to an assessment based on information received or discovered, such as through their various data-matching programs.

Small businesses automatic penalty relief – once in 3 years

Available for small businesses and some other entities – a penalty will not be applied to tax returns and activity statements for an inadvertent error. The relief cannot be applied for; it will be automatically granted by the Tax Office no more than once every 3 years.

See penalty relief .

Commissioner’s new power to modify operation of the law

As foreshadowed in May 2015, the government has legislated to give the Commissioner of Taxation the remedial power to modify the operation of the tax and superannuation laws to address unforeseen or unintended outcomes.

The Tax and Superannuation Laws Amendment (2016 Measures No. 2) Bill 2016 was passed parliament on 9 February 2017.

The new measures (in essence) provide that the power would only be exercised in a way that it is favorable to the taxpayer(s), when it has been determined that the impact on the Commonwealth budget would be negligible, and only as a last resort.

Before exercising the power, the Commissioner must be satisfied that any appropriate and reasonably practicable consultation has been undertaken, consistent with section 17 of the Legislation Act 2003. The Tax Office has stated that the Commissioner “will consult publicly prior to the making of any legislative instrument.”

The Tax Office has published an information page regarding the exercise of the new powers and an online form for taxpayers to use to initiate a process.

Initiating a dispute

To take up a dispute, there are a number of ways to proceed:

  • Simple matters, such as a clerical error or oversight, can be dealt with by way of a written request for amendment  except for SMSF super funds, for which any amendment requires the annual return to be re-submitted in full – see here
  • In simple matters the ATO may provide a contact telephone number in the amended assessment, which can be used to question the matter without having to identify the matter with legal precision.
  • For individuals and small businesses The Tax Office now provides an In-house facilitation service which is an can be used expedite the management of tax or super disputes without the need for formal processes objection. The process is free, not compulsory, and does not affect taxpayer’s rights of review, for which the time limits should still be kept in mind. Further details of this service can be reviewed here.
  • More complicated matters involving tax assessments, administrative penalties, Private Rulings and reviewable GST decisions are usually dealt with by way of objection.
  • Electronic options for requesting an amendment are progressively being made available on-line – unassisted individuals via the myGov account portal, other entities via the business or tax agents’ portals.

For a summary of amendment request methods with links to forms for all entities go here.

Except for matters of fraud or tax evasion, there are time limits within which amendments can be made, or an objection considered (see more on this below).

The financial penalties which apply to tax misstatements, omissions or errors are designed to reward early and voluntary disclosure, with a combination of administrative penalties and interest applying to underpaid tax.

The Tax Office can also launch a prosecution for offences for which there are court-imposed fines, and in some matters, imprisonment. In practice, prosecution action is reserved for the more serious or willful cases.

Within limitations, amended assessments and penalties can also be the subject of a request for review or objection.

Time Limits on Amended Assessments

In the case of fraud or tax evasion, or to give effect to objection, appeal or review decisions, there is no time limit on the Tax Office issuing an amended assessment to increase a taxpayer’s liability.

In other cases, the Tax Office is subject to a two or four year limit on amendments which increase the tax liability. The time limits can be extended with Federal Court approval if further time is needed for an investigation.

Under rules which have been in place since the 2004-05 tax year, the time limits for amendments are generally:

2 Year Amendment Period:

  • Individuals (apart from the exceptions noted below)
  • Small Business Entities

4 Year Amendment Period:

  • Individuals receiving distributions from non-small business entity trusts and partnerships (other than public trading trusts and corporate unit trusts)
  • Taxpayers associated with tax schemes and other special cases
  • Individual’s superannuation excess contributions tax assessment
  • Small Business Entities requiring adjustments under CGT earnout rules
  • All other taxpayers

Indirect Taxes

  • Indirect taxes (GST, WET, LCT and Fuel Tax) have their own rules – about which see here. The rules provide for a 4-year amendment period.

Review periods for most matters run from the date (or deemed date) a notice of assessment is issued.

Objections

The important distinction between an “objection” and an amendment request, is that a legal objection preserves your rights to take the matter further, if a decision is not favorable to you. This should be considered in the light of the relative importance, or economic value of the issues in dispute.

A valid objection must be in writing, explicitly “objecting” or stated to be an objection, and be lodged within the time allowed. It must identify the disputed matter with sufficient precision, the year and any reference number, such as a notice of assessment.

Without court or tribunal consent, your case is limited to the grounds stated in the objection; care should therefore be taken to include all the possible grounds.

Forms – Objection Forms

Whilst there is no prescribed format for an objection, the ATO provides downloadable forms to help ensure that the matter you are disputing is securely raised, and that expected forms of documentary evidence is included.

There is no lodgement fee for a notice of objection.

Objection Time Limits

The objection time limits are those periods in which a valid amended assessment may be made, which are summarised here: See Decisions you can object to and time limits

That includes amendments to amended assessments, with some limitations. Objections to amended assessments are confined to the later of the original assessment objection period, or 60 days after the amended assessment.

References for these matters are set out in Sections 170 and 173 of the Income Tax Assessment Act 1936 and Section 14ZW  of the Tax Administration Act 1953.

Late Objections

Late objections may be considered on request, at the ATO’s discretion, for which there are guidelines documented in ATO Practice Statement PS LA 2003/7.

Information requirements for an Application to extend the time to lodge an objection are here: Application for extension of time to lodge an objection.

Time Taken For a Decision On An Objection

If the ATO has not made a decision within 60 days you can write and request that they do so. Generally, if decision hasn’t been made within a further 60 days, the objection is deemed to be disallowed.

Reviewable Decisions

Objections may be lodged against reviewable decisions, commonly including tax assessments, administrative penalties, private rulings, and reviewable indirect tax decisions (such as GST).

The ATO provides detailed guidance for obtaining reviews and lodging objections here.

Getting help

Managing taxation disputes is not an easy D.I.Y. area, because the tax law is very complex, and often what seems simple, isn’t. The requirements for legal validity at various stages of a review process can be exacting, and failure to observe the details can result in lost opportunities to save tax or penalties.

If a significant amount of money is at stake, professional guidance is a wise investment. It is important that your accountant has experience in tax disputes and the negotiation of claims and settlements with the ATO, not just tax return preparation.

Assistance for small business in resolving disputes

The government has announced measures to assist small business by holding the costs down and providing a faster process to resolve disputes.

A Small Business Concierge Service within the Australian Small Business and Family Enterprise Ombudsman’s office is to be established to provide support and advice about the Administrative Appeals Tribunal process, and a dedicated Small Business Taxation Division within the AAT will be created. See media release.

See also:

Other Avenues of Review

  • Complaints – Information about lodging a complaint is provided here.
  • Appeals from decisions on objection will go to the tribunals and/or through the court system depending on the matter and nature of dispute.
  • The Tax Ombudsman deals with complaints concerning Public Interest Disclosures issues relating to the ATO or the Tax Practitioner’s Board.  The tax complaint handling role was transferred to the Inspector-General of Taxation from 1 May 2015.

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This page was last modified 2018-11-29