Disputes procedures

Clauses 236 and 241

Issue: Commissioner’s ability to truncate the disputes process by agreement under a taxpayer-initiated dispute

Submissions

(Chartered Accountants Australia and New Zealand, EY)

The proposed amendments should be deleted. (EY)

Alternatively, the proposed amendments should be revised so that neither the taxpayer nor the Commissioner is bound by the exclusion rule. (Chartered Accountants Australia and New Zealand, EY)

Comment

Under current law, the Commissioner must issue a Statement of Position in response to a taxpayer’s Statement of Position. When the Commissioner and taxpayer agree that a dispute should proceed to the challenge phase, this has the potential to delay a dispute unnecessarily and impose unnecessary administration costs. The proposed amendments ensure that truncation is allowed in a taxpayer-initiated dispute after the taxpayer has issued a Statement of Position without requiring the Commissioner to first issue a Statement of Position.

The Commissioner and taxpayer must agree in writing to truncate a dispute. Submitters were concerned that applying the exclusion rule only to a taxpayer in a truncated dispute could place the Commissioner in a different and stronger position than the taxpayer. Officials consider that a taxpayer could avoid the application of the exclusion rule in this way by not seeking to truncate the dispute after issuing their Statement of Position.

Recommendation

That the submissions be declined.

Issue: Commissioner’s ability to truncate the disputes process under a taxpayer-initiated dispute

Submission

(Matter raised by officials)

The scope of the remedial change should be expanded so that in a taxpayer-initiated dispute when a taxpayer has issued a Statement of Position, the Commissioner should not be required to issue a Statement of Position if any of the exceptions in section 89N(1)(c) of the Tax Administration Act 1994 apply. The exclusion rule should not apply in a taxpayer-initiated dispute after a taxpayer has issued their Statement of Position if any of the exceptions other than the exceptions for truncation by agreement apply.

Comment

Under current law, the Commissioner must issue a Statement of Position in response to a taxpayer’s Statement of Position even if one of the exceptions to completing the disputes process applies. Agreement between the Commissioner and a taxpayer to truncate the disputes process is only one of the circumstances set out in section 89N(1) when the requirement to complete the full disputes process does not apply. The other circumstances are if:

in the Commissioner’s opinion the taxpayer has in the course of the dispute committed an offence that has effectively delayed the process;
a taxpayer involved in a dispute, or an associated person of the taxpayer, has taken steps to relocate their assets to avoid or delay the collection of tax;
the taxpayer has begun judicial review proceedings in relation to the dispute or an associated person of the taxpayer involved in another dispute involving similar issues has begun review proceedings;
during the dispute, the taxpayer fails to comply with a request under a statute for information relating to the dispute and fails to comply within the period that is specific in the request; and
the taxpayer and the Commissioner agree in writing to suspend the dispute pending a decision in a separate test case that is being challenged.

Officials consider all of these situations could potentially apply in the period between the taxpayer issuing their Statement of Position and the Commissioner issuing hers. It would be contrary to the policy intent of the exceptions in section 89N(1) if the Commissioner was required to issue a Statement of Position when one of the exceptions applied. In these other circumstances it would not be appropriate for the taxpayer to be bound by the exclusion rule.

Recommendation

That the submission be accepted.