tax disputes

Headnote

What is a tax dispute, and how do tax disputes occur?

Preparing and warning a client of the possible cost and scope of a future tax dispute is an important part of an accountant's day-to-day practice, in two articles over the coming months, I aim to demystify some of the important issues that exist where a client is involved in a tax dispute.

This first article describes a tax dispute, and provides a discussion of how and when tax disputes commonly occur in the Australian economy. The second article, Tax Disputes - seeking review, will outline some of the important considerations in relation to when a taxpayer receives an adverse taxation objection decision from the Australian Taxation Office (ATO) and how a taxpayer can seek review of the adverse taxation objection decision in the Administrative Appeals Tribunal (AAT).

TYPES OF TAX DISPUTES

In general terms, there are four broad types of tax disputes in the Australian economy:

Tax disputes type I

Tax Disputes Type I generally exist between a taxpayer and the ATO, where the taxpayer has lodged a taxation objection in relation to a Notice of Assessment or Notice of Amended Assessment.

Thereafter, the taxpayer seeks review of an adverse taxation objection decision made by the ATO in the Federal Court or the AAT (or, alternatively, such tax disputes may involve a State or Territory (State) revenue authority and in relation to State taxes - eg payroll tax).

An example of tax disputes type I (or Part IVC proceedings) occurs in circumstances where a taxpayer seeks review of an adverse taxation objection in the AAT involving the operation of the eligibility conditions Imposed by the small business CGT concessions in Division 1 52 of the Income Tax Assessment Act 1997.

Tax disputes type I would also include disputes involving ATO-issued public rulings and/or private rulings.

Tax disputes type II

Tax disputes type Il exist where the tax dispute does not involve the ATO as a party to the tax dispute.

These typically occur where the tax dispute exists between two or more parties in a legal agreement or some other type of commercial dealings.

In these circumstances, one of the parties may disagree with the meaning of a contractual term of a...