Battler for small business could be next ATO commissioner
Tom McIlroy Aug 21, 2023 – 5.00am
A program designed to level the playing field in costly legal disputes between the Tax Office and small businesses needs better guardrails on funding agreements, the independent watchdog says.
The $30 million small-business litigation funding scheme was established by the Morrison government, recognising that businesses fighting the ATO at the Administrative Appeals Tribunal are at a major disadvantage in relation to legal bills and know-how of the law.
Tax Inspector-General Karen Payne: “It doesn’t seem fair that at the start of the litigation process, you don’t know how much of your cost you will have to fund for yourself.” Brook Mitchell Inspector-General of Taxation and Tax Ombudsman Karen Payne reviewed unresolved complaints related to the program’s operations, noting that taxpayers fighting an assessment carry the burden and onus of proof, as well as tough requirements for evidence. They also have to pay market prices for legal representation, where the ATO can access government rates.
Ms Payne told The Australian Financial Review businesses and the ATO are spending considerable time, expense and effort to clarify costs claimed under the program.
Her report says many disputes would be less complicated if public guidance and other materials were more consistent with the program’s intent and better explained.
“It doesn’t seem fair that at the start of the litigation process, you don’t know how much of your cost you will have to fund for yourself, versus how much you’ll be reimbursed,” she said.
“What we found was that people got some way into their dispute and then suddenly, the ATO says, ‘Now we want all this documentation from the legal representative because we don’t believe the claims’ and ‘We’re now not going to fund these amounts because we think reasonable costs looks like this.’” If the ATO engages external legal representation as part of a dispute in the AAT’s small business taxation division, it will cover reasonable costs for an equivalent level of legal representation.
Costs covered can include solicitors’ fees to the same level as that retained by the taxation commissioner. Since 2019, 65 small businesses have received funding.