"I have just received the first letter asserting that distributions from partnerships and trusts have not been reported in the recipients' returns. I was interested that four assertions related to my own family so, whilst going pale, I immediately checked them to stop the heart palpitations. Sure enough all had been reported correctly.
Is this another mess that the ATO are creating by not checking their own information thoroughly before sending this type of query out? How much of our valuable time will be wasted checking on their incorrect information and then responding to correct their assertions within 30 days of their letter.
We all fully support the ATO doing its job in tracing income, but the key to that support is them doing their job properly in the first place."
MEMBER 2 writes:
"I have today received one of the Partnership and Trust Income Distribution Review letters addressed to me regarding a particular individual client of mine.
I do not like the tone of the letter and Deputy Commissioner Erin Holland has a hide the way she has written to me.
The letter sets out information for the 2005, 2006 and 2007 years and Ms Holland informs me that my client has not taken reasonable care. Accordingly, Ms Holland says a penalty of 25% is applicable. This is because in respect of trust distributions, the trustee would have notified the beneficiary of the distribution (correct), that the distributions were for more than one year (correct) and (amongst other things) “the issue being examined is uncomplicated in nature” (correct). Ms Holland graciously gives my client 3 weeks to make a voluntary disclosure to get the penalty reduce by 80%.
The trouble with this uncomplicated-in-nature issue is that it has nothing to do with my client.
The Tax Agent who has lodged the trust tax return (which the trustee does not give to the beneficiary) has disclosed to the ATO my client’s individual TFN even though the units in the Unit Trust in question have always been held in the name of my client’s family trust (and which the Tax Agent’s financial statements correctly show). So it is the tax return preparer of the trust’s tax return that hasn’t taken reasonable care, not my client.
I am writing to Ms Holland for an apology."