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Thousands of Australians do their own tax and then object to the result, a phenomenon the Tax Ombudsman has described as “weird”.
Australians lodging their own annual tax return are the source of more than half the complaints lodged with the ATO, and a new report by the independent watchdog has found a spike in disallowed small business objections during the COVID-19 pandemic.
A lengthy review has found that of the more than 27,000 Tax Office objections lodged in the 2021 financial year, 50 per cent were allowed in full. But superannuation funds and non-profit groups lodging objections faced much higher rejection rates than the general population.
Inspector-General of Taxation Karen Payne. Brook Mitchell
Karen Payne, the Inspector-General of Taxation and Taxation Ombudsman, said it was unclear why so many taxpayers were objecting to their own self-assessed tax information.
One theory is that they could be requesting an amendment to their return from a previous financial year because an objection is the only way to seek a change once the review period has elapsed.
“You would normally expect that people would object because the Tax Office has audited them and come up with a different answer on what tax they owe,” Ms Payne said.
“But more than 50 per cent of objections going through the system are actually taxpayers objecting about their own lodgement, which is weird.”
Another possible explanation is that taxpayers changing accountants could be uncovering mistakes from previous returns.
The report found that new tax measures introduced to deal with the pandemic had created increased compliance and administration costs for the ATO, taxpayers and tax agents.
In financial year 2021, of the nearly 30,000 objections resolved, 12,204 were completed as part of the implementation of COVID-19 stimulus measures.
There was a 34 per cent leap in total objections compared with the previous year.
Individuals face an average wait time of 77 days to have their objections resolved by the ATO; small businesses face an average wait time of 86 days.
Wealthy taxpayers wait an average of five months, and public and multinational companies wait an average of 10 months.
“I think 60 days is probably fair enough but what you see when you look at the data is that the decisions that are taking longer by and large are mostly review decisions about ATO compliance action,” Ms Payne said.
“It’s not surprising but it is not ideal that people have to wait that long to get certainty, particularly if they want to go off and challenge it through the courts.”
Objection outcomes for small businesses in the 2021 financial year will be the subject of further analysis, along with outcomes for privately owned and wealthy groups.
BDO tax partner Mark Molesworth said the interim report was the first time anyone had completed a deep dive into the data on ATO objections and their outcomes.
“When you consider there are more than 14 million individual tax returns lodged annually, not to mention the income tax, GST, FBT and other obligations that businesses have to comply with, having fewer than 30,000 objections lodged each year is quite remarkable.”
He said the data highlighted important areas of focus for taxpayers and the ATO.
“For taxpayers, it is vital to ensure that any objection made is valid, so they don’t throw good money after bad.
“For the ATO, making sure that all relevant information is known at the audit stage might cut down on the large proportion of objections allowed in full, and save both parties’ time and money.”