Tips for Small Businesses in Tax Disputes

Tax disputes can take a toll on taxpayers. There are some lesser-known developments that may assist small businesses in tax disputes: in-house facilitations, Dispute Assist, and the AAT’s Small Business Tax Division.

Introduction
The Australian Tax Office (ATO) is visiting small businesses in Tasmania, including cash businesses,1 as part of a ‘nationwide crackdown on the black economy’.2 The aim of the program is to protect honest businesses from unfair competition by addressing black economy activities. A wide range of industries may be affected, including restaurants and cafes, vehicle repairers, personal care businesses (including hairdressers and nail salons), pharmacies, construction businesses, clothing stores, grocery stores/small supermarkets and butchers.3

Tax disputes can take a toll on taxpayers, in terms of resources (time and costs) as well as emotional stress. In the event a small business is caught up in a tax dispute, there are some lesser-known recent developments that may assist the taxpayer.

Recent developments
In-house Facilitation
The ATO offers in-house facilitation. This is a mediation service that is available to individuals or small businesses with a tax or superannuation dispute. In an in-house facilitation, a trained ATO officer, who otherwise has no involvement in the case, would attend a meeting as an impartial facilitator with the taxpayer and the ATO case officers. The aims of the meeting may be to identify the issues in dispute, develop options, consider alternatives and attempt to reach a resolution. Key advantages of this service are that it is free, and can be available at any stage from the audit up to and including the litigation stage.4 That said, it is worthwhile to keep in mind that the ATO may not be in a position to negotiate a resolution until the taxpayer has provided all of the relevant information/evidence.

Dispute Assist
The ATO has introduced Dispute Assist, a free service to help unrepresented individuals and small businesses with the dispute process. The service is unique in that the ATO is providing its personnel to help the taxpayers with their disputes against the ATO. This service is not available during the audit stage. Rather, it is limited to taxpayers who a) lodge an objection; b) are not represented by an accountant, tax agent or lawyer; and c) are suffering from significant or exceptional circumstances. Under this program, a ‘guide’ – an experienced ATO officer who is otherwise not involved in the case – would work with the taxpayer to put them in touch with the relevant contacts for the purpose of resolving the dispute as early as possible; ensure that all options have been explored in resolving the dispute; provide assurance that the dispute is being handled fairly; and assist the taxpayer to access services to help them move forward.5 However, the guide would not provide the taxpayer with legal advice or represent them in proceedings against the Commissioner of Taxation. Where such services are required, the taxpayers should make their own arrangements.

Small Business Tax Division (SBTD)
The SBTD commenced in the Administrative Appeals Tribunal in March 2019, as one of the measures introduced by the Government to make it easier for small businesses to review decisions of the ATO.6 The term ‘small business’ is somewhat generously defined as a business with an aggregated turnover of less than $10m.7 It is expected that the ATO will run most of the cases in the SBTD in-house, but where a matter involves:

• significant technical or factual complexity;
• issues of significance or high sensitivity; or
• a precedential ATO view being challenged,

– the ATO may engage external legal representation.8 Importantly, where this happens, if the taxpayer does not have legal representation, the ATO will cover the taxpayer’s reasonable costs to engage an equivalent level of legal representation to act on the taxpayer’s behalf in the SBTD.9”

As at 30 June 2019, the AAT received 123 applications in its SBTD, with five of those finalised and 118 on hand.10 The AAT is required to provide its written decision and reasons for decision within 28 days of the conclusion of the hearing.11 Parties in the SBTD can expect close case-management by the AAT in order for it to meet this timeframe.

Conclusion
With increased ATO activities announced, it may be helpful to keep these recent developments in mind, in case they may be of benefit to taxpayers caught up in a tax dispute.

Angela Lee
Barrister
Victoria Bar
angela.lee@vicbar.com.au

Angela Lee is a barrister at the Victorian Bar specialising in tax law. She serves on a number of committees, including as Deputy Chair (Melbourne) of Law Council of Australia’s Tax Committee.

All webpages referenced were last accessed in November 2019.

1. ATO media release ‘Up to 500 Tasmanian small businesses can expect a knock o the door from the ATO in March’ last modified on 12 March 2019, https://www.ato.gov.au/Media-centre/Media-releases/Up-to-500-Tasmanian-small-businesses-can-expect-a-knock-on-the-door-from-the-ATO-in-March/ (ATO March 2019 media release).
2. ATO media release ‘ATO hits the road in Northern Territory as part of black economy blitz’ last modified on 24 May 2019, https://www.ato.gov.au/Media-centre/Media-releases/ATO-hits-the-road-in-Northern-Territory-as-part-of-black-economy-blitz/.
3. ATO March 2019 media release (n.i above).
4. See https://www.ato.gov.au/General/Dispute-or-object-to-an-ATO-decision/Options-for-resolving-disputes/In-House-Facilitation/?=redirected_inhousefacilitation.
5. See https://www.ato.gov.au/General/Dispute-or-object-to-an-ATO-decision/Options-for-resolving-disputes/Dispute-Assist/.
6. AAT 2018-2019 Annual Report, ‘Key achievements in 2018–19’, https://www.aat.gov.au/about-the-aat/corporate-information/annual-reports/2018-19-annual-report/2018-19-at-a-glance.
7. AAT Guide to the Small Business Taxation Division (https://www.aat.gov.au/AAT/media/AAT/Files/Directions%20and%20guides/Guide-to-the-Small-Business-Taxation-Division.pdf) at [2.3].
8. ATO DR IB 2019/1 on ‘Small Business Taxation Division, AAT’ (https://www.ato.gov.au/law/view/pdf/adhoc-html/drib20190001.pdf) at [3].
9. See the ATO ‘Small business litigation funding’ webpage for details: https://www.ato.gov.au/General/Dispute-or-object-to-an-ATO-decision/In-detail/Small-business-litigation-funding/.
10. AAT 2018-2019 Annual Report (n.vi above), ‘AAT key caseload statistics’.
11. AAT Guide to the Small Business Taxation Division (n.vii above) at [7].

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