On Friday 29 November 2013, Tax Counsel Stephanie Caredes CTA attended a meeting of the ATO Tax Practitioner Advisory Group. Various issues were discussed at the meeting including concerns raised by The tax Institute about possible changes in ATO practice in requiring taxpayers to information in potentially unreasonably short-time frames.
Issues discussed included:
- The Professional Associations raised concerns around short timeframes to respond to ATO information requests. The ATO advised the starting point advised the standard is 28 days with exceptions for particular circumstances, such as for refunds;
- The Professional Associations raised concerns around the capability of the Tax Agent Portal to support the activities of tax agents;
- Progress on improvements being made to the ATO website;
- ATO consultations on the objections process and how tax agents can assist clients to manage their tax debt;
- Future initiatives and electronic service delivery of the ATO including the “Streamlined Tax Return” project and Standard Business Reporting. Members should note that the “Streamlined Tax Return” project involves the creation of a web-based platform for taxpayers with simple affairs to lodge their tax return. The information available is the same as the pre-fill information available via other means. This is effectively a shorter more streamlined version of e-tax.
Following the meeting, the ATO issued these key messages:
1. Streamlined tax returns
From July 2014, the ATO will introduce a new online substantially pre-prepared tax return for individual taxpayers. Taxpayers will be directed to login through my.gov.au to the secure ATO website where the return will be available for them to review, edit/add information as necessary and lodge.
The ATO will ‘push out’ messages regarding the availability of the new tax return to eligible self-preparing taxpayers via email and SMS.
The new return will use the information the ATO already receives from third party sources (e.g. employers and financial institutions) and will not result in any additional burden on these data providers.
The new return will have some key differences to the current e-tax service:
- Fully online rather than requiring a software download and installation;
- Available on mobile devices such as tablets and smart phones;
- Expanded and automatic pre-filling of the return;
- Substantially less screens to complete;
- Targeted to those with simpler tax affairs.
In 2014, the return will be specifically marketed to 1.4 million taxpayers who currently prepare their own return and whose affairs are likely to meet the eligibility tests. The number of taxpayers who will be able to take advantage of this new approach will be increased in later years.
2. ATO website
Following the ATPAG meeting on 6 September, the ATO established the ATO website limited life working group where the Professional associations are represented.
The ATO recently visited a small number of tax professionals to gain a greater insight into the issues that tax practitioners are currently facing. The visits confirmed that the three main areas of concern are the lack of a print friendly function, broken links and the search function.
A prototype of the printer friendly function was provided to the working group for review. The new print friendly functionality is scheduled for release on 17 December 2013.
The ATO has resolved the root cause of the issue with broken links. It is expected that the majority of broken links will be resolved by the end of December. Broken links can be reported to the ATO via the website feedback form located at the bottom of each page on the ATO website.
The ATO has resolved some issues with the basic search function and is working with Google, the suppliers of the search function, to understand how to continue to improve the search functionality for the site. A solution is expected progressively through next year.
3. Lodging objections
Each year the Small Business/Individual Taxpayer business line receives more than 20,000 objections. Approximately 60% result from audit amendments.
Clients of tax agents lodge approximately 70% of the objections received and only 36% are received through the Tax Agent Portal. Further information is needed on 30% of objection requests received from tax agents.
Around 3,500 of the objections received are in relation to Shortfall Interest Charge amounts. Only 13% were valid objections as the others did not have objection rights against the imposition of the charge, or the amount of the interest after remission was less than 20% of the tax shortfall amount.
The other 87% were treated as remission requests/reviews with a large proportion (75%) being disallowed.
In partnership with professional associations and tax practitioners the ATO will undertake consultation on:
- ways to increase the number of objections lodged through the Tax Agent Portal;
- ways to reduce the number of invalid objections lodged;
- useful communications and tip sheets on the correct application of the policy for remission of shortfall interest charge; and
- ways to assist tax agents to provide the information necessary to determine their client’s objection at the time of lodging their objection.
The ATO website has some information on how to object to a decision and lodging valid objections.
4. Reviewing Activity Statements
Section 8AAZLGA of the Taxation Administration Act 1953 (TAA 1953) provides the Commissioner with a legislative discretion to retain a refund amount for the purpose of verification. In determining whether to retain the refund, the law requires the Commissioner to consider 10 factors based on information that is available to the Commissioner at that time. Therefore any information that can be provided by the taxpayer or their agent to support the refund claim will assist in our decision making process.
If the Commissioner exercises his discretion under section 8AAZLGA to retain an amount, the Commissioner must inform the entity of such a decision within 14 calendar days of lodgment of their relevant Activity Statement.
Current ATO advice to staff dealing with BAS refunds is that a reasonable timeframe to provide documents supporting the refund claim is three working days. Depending on the individual circumstances of the taxpayer, timeframes outside of this may be negotiated with the taxpayer or their agent.
Procedures are not prescriptive about timeframes as some judgment is required depending on the case. Factors such as availability of records (for example records with the agent who has just lodged the Activity Statement being audited) and ability to produce documents electronically should be taken into account including recognising the agent may have appointments and requires time to submit.
The ATO does not encourage the request of information within unreasonable timeframes and it is not part of our desired relationship with tax agents. We do seek to accommodate a reasonable time within a three working day timeframe. If the requested information is not received, the operative must decide to hold the refund, release the refund, or refer the case to audit. In the absence of requested information, we may not have any alternative but to retain the refund or to refer the case for a later audit. It is our preference to clarify the matter in the first instance.
The ATO has recently reinforced the expectation that the request of information should be within a reasonable time frame which we believe to be within three working days. In light of the sample feedback, this will be reinforced again with ATO staff this coming week. The ATO is conscious of cash flow implications for taxpayers and the work commitments of tax practitioner, however, this needs to be considered in the context of section 8AAZLGA of the TAA 1953.
Unreasonable timeframe complaints were an area that was identified as an issue last financial year. ATO focus on this issue this financial year has seen notable improvement which has been achieved. Since July 2013, there have been five complaints from tax agents relating to unreasonable time. To put this in perspective, in terms of performance relative to the number of complaints received, the Refund Integrity area has finalised more than 11,300 cases in this time period. From these cases, the ATO has made adjustments to refunds in the order of $186m.
Members continuing to experience what they view to be an unreasonable timeframe imposed to respond to an information request by the ATO in any context should contact us at Tax Policy.
Members who seek further information in relation to the above should contact us at Tax Policy.