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16 May 14 Australian Taxation Office - a hair-pulling exercise

MEMBER 53 writes:

“I never write these types of letters.

Week after week I have a little laugh as I read the weekly Tax Institute emails and specifically the Member Feedback at the bottom of those emails, and the frustration that other firms have felt at the hands of the Australian Tax Office.

I now know - this is no laughing matter.

Today I have received a June 2010 Notice of Amended Assessment for a client of mine.

This has issued because 28 days ago, the client received a letter asking her (the ‘transferee’) to explain the $715,000 that was transferred from a bank account in the USA to her account in Australia with Westpac. The name shown as the ‘transferor’ on the letter she received was her husband.

I rang the number provided on the ATO correspondence - the foreign source income team. I spoke to a lady there that had issued the letter.

I explained to the ATO that the funds transfer had come from her husband. I explained that she and her husband had been living in Los Angeles for about four years, and that these funds were the after-tax amount that was transferred back to Australia when they returned to Australia with their children. My client was a stay at home during their time in the US, looking after their two boys.

During the conversation, the ATO asked me for proof that they were married. Without talking to the client, I advised the ATO that it may take some time to locate the marriage certificate given that they have two boys, aged 17 and 14.

The ATO also asked me for proof that the husband had paid tax in the US. I then told the ATO that they had been back here in Sydney for about three years, and it may take some time to locate the usual 40 page US income tax return, it may be packed in storage etc etc.

On top of this information request, as any normal accounting and tax firm is doing at this time of year, we are busy trying to lodge the June 2013 income tax returns for clients so that we can meet the new ‘statistics measures’ and so as to avoid Failure to Lodge Penalty notice that the ATO seems to be issuing with wild abandon.

So the client has gone away to find their marriage certificate from 23 years ago, they have gone away to find the 40 page US income tax return.

Not to worry, come day #28, the Australian Tax Office issues a Notice of Amended Assessment to my client including as income the $715,000 which was transferred to her account from her husband’s USD account. The amount of income tax now payable is approximately $309,000, plus $65,000 in General Interest Charge.

I had actually rang the lady there at the ATO last week advising her that the client had located and scanned the US income tax return to me (some 18MB in size so too big to email to ATO). The ATO said it was too late, amended Notice had been generated. She told me to lodge an objection to the Notice of Amended Assessment.

My Questions:

Where will I find the time to prepare and draft the objection to this Notice of Amended Assessment?

How will I explain to my client that the ‘ATO system’ generated a Notice of Amended Assessment, notwithstanding the (very reasonable) explanation that we gave?

Who will pay me for my time in drafting the objection? Assuming my client tells me that they will not pay my fees for something that the ‘ATO system’ has done?

Who will take the phone calls from Recoveriescorp or Veda or Dun & Bradstreet when they start calling because my client has not paid the $309,000 plus interest?

Having now had some personal experience of dealing with the inane, I will no longer laugh when I read those weekly emails and the member feedback from the Tax Institute!!!!!

Fair dinkum, this will do me.”

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