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An Inspector-General of Taxation report shows pandemic support measures caused a huge increase in small business requests for review.
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COVID kicked ATO objections up a gear
11 October 2022
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Objections to the ATO from small business doubled during 2021 as accountants and their clients wrestled with COVID support programs, the Inspector-General of Taxation says on the latest Accountants Daily podcast.
Launching an interim report on the ATO’s handling of objections, the Inspector-General of Taxation Karen Payne said 61 per cent of objections in 2021 came from small businesses and many more than usual were channelled through accountants as they became the conduit for pandemic measures.
“In FY21, there were 15,587 objections received from small business and in the prior year it was 7,000,” she said.
“So it doubled. Those objections were about COVID stimulus measures that small business we're objecting to.”
“The other thing that the data tells us is that in the FY21 there was an increase in the number of objections being lodged by registered tax agents. That's consistent if you think about the nature of COVID stimulus measures – they're new areas of law.
“So the practitioner in particular has an obligation or an expectation that they will get themselves up to speed with those new areas of law. The small business is then increasingly reliant on the practitioner to advise them on what are their rights and what are their entitlements, and that's coming through in the data.”
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“And I'm sure for practitioners who are listening to this, it's no surprise that it was a busy time, right? Everybody was flat out, trying to keep up with the reforms and to help the clients and small businesses in particular to keep ahead of it.”
Ms Payne said one consequence of this was the number of people handling objections at the ATO also more than doubled during the pandemic, but another consequence was a huge rise in disallowed objections.
“When you just look at disallowed that in particular small business had a large number of objections disallowed in FY21,” she said.
“And again, that kind of correlates back to the COVID activity that's taking place and an increase in the number of objections that concern small business that are related to COVID, but equally an increase in the number of objections that are disallowed.”
She said the IGTO had launched the interim report, which represented phase one of its inquiry, to get some data out as soon as possible.
Phase 2 of the inquiry would take a closer look at the exact cause of objections and the value they represented. She said in particular it would help to know the dollar value of objections upheld against those declined, and whether there was a minimum amount below which an objection was not worthwhile.
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