An “important step”: ATO moves to extend independent reviews to small businesses in tax disputes

Australia’s Small Business Ombudsman has welcomed a move by the Australian Taxation Office to extend its independent review function to small businesses through a pilot program.

Appearing before Senate Estimates hearings this week, ATO Commissioner Chris Jordan said the ATO will soon commence a trial that will allow for independent reviews to be conducted when a tax dispute arises between the tax office and a small business. 

Until now, such reviews were only available to companies with annual revenue of more than $250 million.

According to Fairfax, the trial will commence on July 1, with Jordan indicating it may later become a permanent feature of the tax system.

“We are going to trial an independent review process for certain small business audits from July 1, with the intention over time that businesses, regardless of size, have access and rights for a fit-for-purpose review prior to finalisation of audit,” he told the Senate hearings.

Small Business Ombudsman Kate Carnell welcomed the news on Wednesday, saying the tax office should be commended for taking the step.

“Since 2013, the ATO has offered a case review service to large business before it issues an assessment. This allows all parties to have a better understanding of the issues and reach an appropriate resolution,” she said in a statement.

“It is pleasing to see that the ATO has recognised that the service provided to large business can be a real help for small businesses with tax issues too.

“The fact that small business will now have an independent area of the ATO to consider matters afresh is an important step and one that we will watch to see whether it provides for informal discussion of issues in a way that avoids formal legal routes.”

Such review processes are more critical to small businesses than their larger counterparts, said Carnell, as in many cases, even the houses owned by small business operators are on the line when there is a tax dispute.

“You need to remember that when small business does its tax, it is highly reliant on trusted advisors, mostly accountants,” she said.

“Getting a call from the ATO saying that there’s a problem is a big shock and extremely stressful.”

The trial is in response to a major Four Corners and Fairfax investigation in April, which exposed the lengths the ATO has gone to in the past to collect small business debts and raised concerns about how the tax office issues garnishee notices for SMEs.

During the Senate hearings, Jordan acknowledged the ATO is “not perfect and we make mistakes” but took issue with the ABC and Fairfax reports, which he said presented a “distorted” picture of how the tax office deals with small business tax disputes.

However, he said the Australian National Audit Office will also be reviewing the tax office’s debt collection process. This will be done separately to a number of other investigations already underway, including one by Treasury in response to the Four Corners and Fairfax investigation. Carnell’s office and Inspector-General of Taxation Ali Noroozi will be contributing to the review. 

Noroozi is also conducting a review into the ATO’s use of garnishee notices.

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