Developing an early relationship with tax officers and reminding them of their obligations as set out in the Taxpayers’ Charter can be useful for practitioners negotiating an ATO audit, a former deputy commissioner has suggested.
How to best manage an ATO audit: former deputy commissioner
Speaking at a CPA Australia City Taxation Discussion Group event in Sydney, former ATO deputy commissioner Michael Cranston said that, while the Tax Office is committed to its reinvention program in becoming a contemporary service-oriented organisation, tax practitioners may need to stand up for their clients who are being unfairly treated in an audit by reminding officers of their obligations.
“They are trying to change the Tax Office’s culture and they have a culture strategy where they have to start thinking about the taxpayer first, and to be service-orientated and all these things,” Mr Cranston said.
“I think sometimes in an audit, if you get an opportunity to talk to tax officers, you’ve got to remind them of these things.
“One of the documents that tries to capture this is the Charter, and if you go through the Charter, it actually talks about what you can expect from the ATO.
“There are a lot of high-level words and it is quite a strong document that you can use against them if they are not behaving well and are being unfair to your clients.”
Citing a recent example, Mr Cranston, now a tax consultant at Waterhouse Lawyers, said a client had been hit with a tax assessment but the practitioner was not presented with the facts.
“[The ATO] said to [the practitioner] you can just do an FOI [Freedom of Information] and get the facts, but if you look at the Charter, it says in an audit we will tell you the facts and explain why we form these tax views, and in some way, [the ATO] is administratively bound by that Charter so you can use that on them if it doesn’t play out the way it should,” Mr Cranston said.
Mr Cranston also noted that it would be useful for practitioners to establish a relationship with the tax officer early on in the engagement.
“When they do an audit, they will give you something that is concerning them from their analytics and they then develop a hypothesis. For example, they might say this business has liquidated twice, some of the PAYG wasn’t paid, so the hypothesis is they are doing a phoenix,” Mr Cranston said.
“They have this hypothesis that they want to test, so when they start the audit, make sure you ask them, why have you started this audit, what is the hypothesis you are trying to test and what is the scope of the audit?
“In the early stages, make sure you ask, can I ring your manager just to introduce myself? I think if you can get into that relationship stuff early, and engage them early, those are good things to have.”