Settling with the ATO | KPMG | AU

Settling with the ATO

Settling with the ATO

Ross Hocking and Divyansh Sharma crunch the numbers on the ATO's latest settlement statistics.

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Recent statistics published by the Australian Taxation Office (ATO) show a 31 percent increase in the number of matters settled from 2014-15 to 2015-16.

Of the 1,362 cases settled in 2015-16, 676 related to Project DO IT (Declare Overseas Income Today), a project which encouraged taxpayers to voluntarily declare undisclosed or incorrectly reported offshore financial activities and avoid steep penalties.

Most market segments, such as micro-enterprises, small businesses and individual markets, have contributed to the increase in settlements. The exceptions are large business and high wealth individuals (HWI).

For large businesses, the number of settlements declined from 81 to 27 in 2015-16. One reason for this decrease was the backlog of older cases settled during 2014-15. Another is the ATO’s recent approach, announced by the Commissioner in February 2016, to pursue matters all the way to Court if necessary. A post settlement review program has also been introduced by the ATO to focus on individual settlements. The reduction in settlements in the large business sector also led to a reduction in revenue from settlements from $2.7 billion in 2014-15 to $343 million in 2015-16.

For HWI, settlements decreased from 90 to 78 but the revenue from settlements significantly increased from $140 million in 2014-15 to $215 million in 2015-16.

Deputy Commissioner Jeremy Hirschhorn recently announced that in 2016-17, the ATO expects to issue an unusually high level of large ($100 million plus) amended assessments as a number of significant matters come to completion. Mr Hirschhorn identified that some of these matters may flow through to settlements (likely to be in 2017-18 and beyond).

The above figures support our observation, in acting for taxpayers, that the ATO is keen to push matters through to assessment quickly, and less willing to settle across the board than in recent years. If you require assistance on any potential or on-going disputes and are considering a settlement strategy, please contact a member of our team.

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