Less litigation, more disputes: what does this mean for taxpayers?

Less litigation, more disputes: effect on taxpayers

Although the Federal Court’s tax litigation workload has decreased, disputes with the Australian Taxation Office (ATO) have not necessarily experienced the same decline. Many are simply being resolved earlier in the tax dispute cycle.  Recent data shows that although tax litigation is currently down, the number of settlements registered by the ATO is up. And more importantly, the amount collected by the ATO from settlements of tax disputes is at a record high.

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Scales of justice

There will always be a need for the courts to clarify the law in tax disputes.

The current shift in the way that the ATO is dealing with disputes, however, means proactive preparation will increase a taxpayer’s ability to impact and influence the outcome of the dispute without resort to litigation.

The majority of tax disputes are factual, making an early focus on robust facts and evidence critical to be able to position a taxpayer to resolve a dispute in its favour.

Resolving disputes early

In our experience acting for and against the ATO in tax disputes, the most effective methods of resolving disputes early include:

  • objective review of taxpayer evidence at the review and audit stages in order to successfully manage and resolve ATO perceptions regarding a taxpayer’s risk profile and avoid/minimise disputation
  • direct discussions and effective engagement with the ATO which involves objective assessment of the facts, evidence and tax technical areas of dispute
  • the use of Early Neutral Evaluation processes
  • mediation by experts, retired judges or other independent mediators
  • the use of jointly appointed experts to determine key issues.

Determining the most appropriate method for taxpayers to resolve disputes with the ATO is key. Insights and experience as to how the ATO considers and deals with disputes will assist in determining the most appropriate approach.

Tax Insights

KPMG Australia's analysis of tax issues and developments.

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Tax Dispute Resolution & Controversy Services

Tax Dispute Resolution & Controversy Services

KPMG’s Tax Dispute Resolution & Controversy Services work with clients to protect against, prepare for, and resolve disputes with tax authorities.

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