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Tax professionals say while some interactions with the ATO regarding financial abuse matters have led to positive outcomes, this does not occur consistently, according to The Tax Institute.
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‘Significant variation’ in ATO’s approach to financial abuse matters
17 January 2025
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The Tax Institute has outlined that the outcomes associated with matters relating to partner and elder abuse can vary significantly depending on the experience, seniority and understanding of the ATO representative that the client and tax professional are dealing with.
The institute highlighted some of its members’ experiences in dealing with these matters in a recent submission to the Inspector-General of Taxation and Taxation Ombudsman’s (IGTO) review into financial abuse in the tax system.
The Tax Institute said while its members identified recent experiences where there were more positive interactions with ATO representatives in matters that involved partner abuse and elder abuse, there were varying approaches taken by ATO officers.
“The more positive outcomes typically arose when the ATO representative had sufficient experience, seniority and understanding of these types of matters and accordingly were able to appreciate that they were not merely dealing with a delinquent taxpayer, but rather a far wider reaching sensitive and personal issue of which tax aspects were one component,” the submission said.
“The ability to then provide valuable assistance in an empathetic, tailored and measured way, was constructive, fair and reasonable in the circumstances.”
The Tax Institute said while some interactions have been positive, the varying approaches of ATO officers were still a broader concern.
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“The nature of a taxpayer’s interactions can differ significantly based on the officer's rank and responsibilities, with feedback indicating that junior officers often rely on scripted responses, and may lack the flexibility and more holistic understanding of such situations to adopt a more nuanced approach,” the institute said.
“This is in contrast to their more experienced counterparts. This disparity can profoundly affect the taxpayer's experience and may also influence the review's conclusions and methodologies.”
The Tax Institute also listed some examples of where its members had provided pro bono assistance to victims to identify some of the issues in the tax system with addressing financial abuse.
“A member provided an example of a client who lived in constant fear while using a pseudonym in a Salvation Army shelter due to financial and other forms of abuse perpetrated by a nephew,”
“The nephew had moved in with the client and manipulated him into becoming a company director, subsequently engaging in GST fraud.
When the ATO identified the fraud, it pursued both the nephew and the client, resulting in the client losing his home and possessions, according to the submissions.
“The ATO advised that it could not assist the client due to his directorship,” it said.
The Tax Institute said another case involved a client whose wife secretly committed GST fraud while engaging in a partnership with the client.
After she left the client, the ATO held the client accountable for the fraud, asserting that the GST refunds had been deposited into their partnership account.
“One of the member’s contentions on behalf of the client was that the fraudulent activities occurred over an extended period, and the ATO's systems should have detected the issue sooner,” the submission said.
“However, the ATO could not forgive the debt, and instead indicated that it would pursue bankruptcy, and initiated court proceedings for recovery.
“Ultimately, an agreement was reached where the debt remained on record but would not be actively pursued, which, while still not ideal, was a preferable outcome to bankruptcy.”
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