Tax Objections – To object or not to object, that is the question

Ever feel that you are paying too much tax? I’m sure you are not the only one. But, have you ever thought that your reasons are justified? There are some instances where your tax assessment can be reviewed and overturned for the right reasons, whether it’s the amount of deductions you have been allowed, the amount of income you have been assessed on or even the way a capital gain has been calculated. This process is called Tax Objection.

Am I entitled to object to a tax assessment?

As the Australian Taxation System is one of self-assessment, you are entitled to exercise your right to object to an assessment made by the Commissioner if you believe the assessment is incorrect or if the tax payable seems excessive for your circumstances. However, the reason for objecting should always be based on a well-made technical tax argument, simply feeling that the assessment is unfair will not be sufficient.

There are certain timing rules and processes that need to be followed, but your tax adviser will be able to advise you of this.

Who is responsible for overseeing the ATO’s activities?

The ATO is the body responsible for administering and main regulator of the Federal tax system. It is the ATO who receives and decides the outcome of a Tax Objection and is therefore also bound by the timing rules and processes set out in the Tax Legislation.

Did you know however, that there is a body which oversees the ATO’s activities called the Inspector General of Taxation and Taxation Ombudsman (IGTO).

IGTO has just released its interim report titled ‘Investigation into the Australian Taxation Office’s Administration and Management of Objections’. This interim report aims to provide taxpayers and their advisors with insight into the breadth and scope of objections work undertaken by the ATO across five financial years.

What are the risks of lodging a tax objection on my own?

After reviewing the recent report, we have noticed some fascinating observations related to individuals applying for tax objection themselves. Here are the numbers:

• Self-initiated objections represented more than half the objections received by the ATO in FY19 – FY21 (excluding COVID-19 objections); and
• in FY19 – FY21, 53%-80% of the objection decisions issued for Superfunds and Not-for-profits (NFPs) were determined by the IGTO as invalid and rejected.

So, based on these statistics, it is evident that taxpayers and advisors who are not skilled in the areas of tax controversies are lodging objections that are flawed in some way. As a result, this process is not only a waste of time for all involved but also highlights the taxpayer’s broader tax affairs, which may increase potential audit activity.

What is the best way to object to your tax assessment?

To avoid rejection and a potential audit, we recommend that you seek the assistance of a qualified and highly skilled tax professional. An experienced tax advisor will be able to assist with the objection process to ensure that the ATO assesses it on its merits and doesn’t reject the application due to invalidity.
In addition, a tax professional can assist by focusing the Tax Objection on the pertinent issues instead of making unnecessary arguments that may be irrelevant to the underlying reason for the Tax Objection.

How Morrows Legal Solutions can help

Morrows Legal Solutions has significant experience in this area, particularly in tax controversy work. Our tax lawyers are well-placed to assist with any stage of the objection process. Please reach out to your advisor if you would like to learn more.