‘Another box-ticking exercise’: CPA, tax lawyer warn of new ATO GIC remission risks

It was noted this change was welcomed and came at a time of “ongoing concern” with inconsistent outcomes, limited explanations for decisions and confusion for taxpayers navigating the remission process.

On this alleged transparency change, the professional accounting body said it was crucial the success of penalty remission requests would “ultimately depend on whether decisions become more consistent and empathetic in practice”.

Jenny Wong, CPA tax lead, said the reforms appeared to be a direct response to long standing issues raised by the Tax Ombudsman.

“The ATO’s move to standardise and centralise interest and penalty remission requests is a welcome step towards greater consistency and transparency, particularly given concerns raised by the Tax Ombudsman and the tax professional community,” she said.

“With the GIC now non-deductible, the financial impact of ATO decisions is much more significant for small businesses and individuals. That makes it critical that remission decisions are fair, predictable and clearly explained, especially where taxpayers have made genuine efforts to comply.”

As the new changes come into play, taxpayers and agents would need to use specific ATO forms when requesting remission which would then be directed to “dedicated” ATO teams.

The ATO revealed this approach was intended to ensure law and policy were applied uniformly, regardless of which officer or channel received the request.

Despite these changes, Vincent Licciardi, tax lawyer and HWL Ebsworth Lawyers partner, said the new process put forward by the ATO “wasn’t really new at all”.

Licciardi said this was because clients and advisors were still required to fill out forms in the hope they satisfied the ATO’s requirements on time, the first time.

“To be fair though, the ATO’s revealed some of its thought process through the questions it poses and real-life examples,” he said.

“For example, clients are more likely to have interest remitted when they have had a good compliance history and their current circumstances cause them to deviate from that good history, say not lodging or paying on time because of a medical issue or cash-flow issue.”

“The ATO’s now also funnelling all the cases through teams of specialised staff. I am very hopeful this leads to improved results, more consistent decision-making and clearer explanations when applications are denied.”

On the subject of dedicated teams, Wong said this combined with clearer guidance had the potential to reduce frustration among both taxpayers and tax and BAS agents.

Wong added that these changes were all good and well, yet they must translate into meaningful improvements instead of adding further administrative steps.

“Tax professionals want to help their clients do the right thing, but inconsistent outcomes have made that increasingly difficult. Dedicated teams applying the same criteria should go some way toward restoring confidence in the system,” Wong said.

“The new forms and examples are a positive development, but the real tests will be whether taxpayers experience more consistent and empathetic decision making. There is a risk that standardisation becomes a box-ticking exercise unless it is matched with genuine discretion and common sense.”

Licciardi echoed similar concerns about “box-ticking”, as the process that had been set in place would turn a discretionary decision for an ATO officer into a mindless exercise.

“If enough boxes are ticked, the client gets a remission and if you’re one box short, the client misses out,” he said.

“I am hopeful commonsense and compassionate decision-making consistent with the law wins out. That will be a success for all involved. Clients and advisors should remember the law in this area is quite flexible and broad.”

“And so, applications should always start with the law, the cases and the ATO’s practice statement. A fulsome application is always required with all the facts and appropriate supporting evidence. Don’t leave it to chance.”

The ATO commenced these changes as interim while it conducted a broader review of taxpayer relief provisions alongside the Tax Ombudsman, who is set to release an inquiry report early this year.