PLEASE NOTE. Information on this page is of a general nature only. For this year's instructions and thresholds click here to visit www.ato.gov.au/individuals/Tax-return/Last updated 4 August 2016

Taxpayers should calculate their own taxable income and rebates on their tax returns in case the Australian Taxation Office (ATO) makes a mistake. Decisions by the ATO are usually accompanied by a written explanation and a contact number for the person or area of the ATO handling your case is supplied should there be any questions or a potential mistake by the ATO. In some very limited circumstances, the ATO will not be able to explain its decisions fully, however, it will still provide as much information as it can. These circumstances include where:

  • another person is involved and releasing information about the ATO decision may breach their privacy or the secrecy provisions in the tax laws
  • the ATO suspects fraud. The ATO may not release information because it might jeopardise its investigations.

When the assessment notice is sent, an accompanying adjustment sheet will show any calculation errors on the return and any other way in which the return has not been accepted.

Taxpayers who think an original assessment is wrong generally have two years to lodge an objection to that assessment, or four years for people with more complex affairs, however, the time to object may be as little as 60 days.

Late objections will only be considered if the taxpayer has given an acceptable explanation for being late and has been granted an extension of time in which to object.

Assessments, amended assessments and private rulings can be objected, and objections should be considered if:

  • you disagree with an assessment or decision you have received from the ATO
  • there is a dispute over how the ATO has interpreted the law
  • you are uncertain about your interpretation of the law.

Grounds for objections

An objection must list all the grounds relied upon. No further grounds of appeal, no matter how valid or relevant, can be relied upon later without permission from a tribunal or the court.

A notice of objection that gives only vague grounds for an objection (e.g. ‘it is incorrect’ or ‘it is excessive’) is not valid. For this reason, objections may need to be prepared by a professional tax adviser.

After the objection

Once the objection is sent to the ATO, a reply may take several months, although a formal acknowledgment is usually sent promptly.

Eventually, the Commissioner of Taxation will either allow the objection, wholly or partially, or disallow it. The taxpayer will receive written notice of the decision.

Appealing a decision

The taxpayer then has 60 days in which to apply to the Administrative Appeals Tribunal for a review of the decision or appeal to the Federal Court of Australia against the decision.

The Administrative Appeals Tribunal

The Administrative Appeals Tribunal is the best place to go if the argument is basically one of fact.

Proceedings are relatively informal and inexpensive, as unsuccessful applicants to the tribunal do not have to pay the commissioner’s legal costs. Hearings can, on request, be held in private. If you request a private hearing, your name and identifying details will not be published (unless there is a further appeal to the Federal Court). Applicants may either appear for themselves or be represented by a lawyer or an accountant.

The tribunal has a much wider power than a court to review any exercise of the commissioner’s discretion.

The Federal Court

An appeal to the Federal Court might be preferable if the matter involves a question of law.

Since an unsuccessful party will usually be ordered to pay some of the legal costs of the successful party, the court is only a suitable forum if the person can afford to pay the commissioner’s legal costs in the event that the appeal is not successful.

Exemption from paying court fees

Relevant exemptions from paying court filing and hearing fees in the Federal Court include if the person:

  • has been granted legal aid for that proceeding
  • is the primary holder of a health care card, a pensioner concession card, a Commonwealth seniors health card or any other card certifying entitlement to Commonwealth health concessions
  • is serving a sentence of imprisonment or is otherwise detained in a public institution
  • is younger than 18
  • is receiving youth allowance, Austudy payments or ABSTUDY benefits.

Refund of fees

Tribunal fees will be refunded to successful taxpayers.

Court costs awarded in favour of a successful taxpayer are likely to include court fees.

Court hearing fees will also be refunded if the hearing does not proceed, and the court is given at least 10 working days notice that it will not proceed.

Further appeals

If the application is made to the Federal Court, then both the taxpayer and the commissioner have a right of appeal to the Full Court of the Federal Court of Australia. On the other hand, if the original application is to the Administrative Appeals Tribunal, there is only an appeal if a question of law is involved. The appeal is to the Federal Court. If a taxpayer is successful in the tribunal and the commissioner appeals, then the commissioner will often offer to pay the legal costs (as assessed by the court) even if the appeal is successful.

Payment pending appeal

The commissioner can demand the payment of tax that is subject to an objection or appeal.

Frequently, however, the payment of any amount that is not in dispute, plus half the disputed amount, will be accepted. The commissioner may also grant an extension of time for payment or accept payment of outstanding tax by instalments.

The commissioner is entitled to charge interest on unpaid tax.